Mortgage Applications Plunge as Surging Interest Rates Deter Buyers

Mortgage applications fell last week as rising oil prices drove interest rates higher, deterring would-be homebuyers, according to the Mortgage Bankers Association.

For the week ending on July 24, MBA's Market Composite Index—a measure of total mortgage loan application volume—plunged 6.4% on a seasonally adjusted basis from one week earlier.

The seasonally adjusted Refinance index plummeted 10% from a week ago, while the Purchase Index, deemed a leading indicator for home sales, dipped 4% week over week.

"Despite housing inventory increasing in certain markets, higher rates have added to ongoing affordability challenges for many homebuyers, which drove the decrease in purchase activity over the week," says Joel Kan, MBA's vice president and deputy chief economist.

According to MBA calculations, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances climbed to 6.76%, the highest rate since August 2025.

Freddie Mac put average 30-year rates at 6.58% for the week ending July 23, also an 11-month high, as the price of oil briefly topped $100 a barrel amid escalating tensions in the Middle East that followed the breakdown of a fragile ceasefire between the U.S. and Iran.

Kan notes that this upward trajectory in rates hit refinance borrowers especially hard, resulting in a precipitous drop in government refinances.

As a result, the refinance share of mortgage activity retreated from 41.2% to 39.5% in a week's time.

However, the adjustable-rate mortgage (ARM) share of activity increased to 8.1% of total applications.

The Federal Housing Administration share of total applications edged down to 16.9% from 17% the previous week. Meanwhile, the Veterans Affairs share of total loan applications dropped to 12.6% to 13.2% from the prior week. The USDA share of total applications inched down from 0.5% to 0.4% during the same period.

How mortgage rates are calculated

Mortgage rates are calculated based on various factors in the economy, and the length of your loan and credit score will also factor into the mortgage rate you qualify for.

The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, because most 30-year mortgages are either paid off or refinanced in roughly eight to 11 years.

That makes the duration on the loans roughly comparable, and mortgage lenders use the 10-year Treasury as a benchmark for setting rates, adding on a risk premium.

Long-term yields for Treasury notes are determined by a number of factors, including the supply of and demand for U.S. government debt, and investor expectations for inflation over the life of the bonds.