Refi Demand Declining Even Before Most Recent Rate Spike

Mortgage application activity pulled back last week, with a sharp decline in refinancing more than offsetting relatively stable purchase demand as mortgage rates moved higher. The Mortgage Bankers Association (MBA) reported a 2.7% decrease in total application volume on a seasonally adjusted basis for the week ending September 4. Purchase applications were little changed, slipping just 0.2% from the previous week on a seasonally adjusted basis. On an unadjusted basis, purchase activity fell 3%, but remained 4% higher than the same week one year ago, earning it's spot as the one positive note for this week's report. Refinancing was a different story. The Refinance Index fell 6% from the previous week and was 25% below year-ago levels, reaching its slowest weekly pace since May 2025. Refinances also accounted for a smaller portion of overall mortgage activity, with the refinance share falling to 40.9% from 41.8% the previous week. Notably, this data was collected before this week's sharpest rate spikes, so this trend will likely accelerate next week. "Mortgage rates moved higher last week, driven by ongoing investor concerns over inflation and the federal budget deficit," said Joel Kan, MBA's Vice President and Deputy Chief Economist. Kan noted that the 30-year fixed rate reached 6.85%, its highest level since June 2025 and 36 basis points above the same time last year.