Refinance and purchase activity slow as inflation and tariff concerns push rates upward
Mortgage rates climbed last week after two consecutive weeks of declines, contributing to a slowdown in application volume, as fresh inflation data dampened any remaining optimism about a near-term rate cut by the Federal Reserve.
Mortgage application activity fell 10% on a seasonally adjusted basis from the prior week, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA). On an unadjusted basis, it rose 13%, reflecting a catch-up from the Fourth of July holiday adjustment.
“Treasury yields finished higher last week on average despite an intra-week drop, driven partly by renewed concerns of the impact of tariffs on the economy,” said MBA chief economist Joel Kan.
As a result, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) rose to 6.82% from 6.77%.
Kan also noted that for the third consecutive week, jumbo mortgage rates remained lower than conventional rates, suggesting some depository institutions may be ramping up balance sheet lending.
Refinance applications dropped 7% from the previous week, though it remains 25% above levels seen a year ago. Purchase applications fell more sharply, declining 12% on a seasonally adjusted basis. However, MBA’s unadjusted Purchase index increased 11% week over week and was 13% higher than the same week in 2024.
Refinance activity was particularly impacted by rising rates.
“Refinance applications also dipped because of higher rates, with refinance applications falling, led by VA refinances partially reversing their previous week’s gain, dropping 22%,” Kan said. Purchase applications fell to their slowest pace since May, underscoring the market’s sensitivity to rate volatility and economic uncertainty.
Rate movement coincided with new inflation data. The latest Consumer Price Index (CPI) from the Bureau of Labor Statistics showed a 2.7% annual increase in June, up from 2.4% in May. Core CPI, which excludes food and energy, edged up to 2.9% year over year.
Following the inflation report, market odds of a Federal Reserve rate cut in July, already low, declined further.
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Despite the rate bump, the refinance share of mortgage activity rose to 41.1%, up from 40.0% the previous week. The share of adjustable-rate mortgages (ARMs) fell to 7.1%.
Among loan types, the FHA share increased to 19.0% from 17.9%, while VA loans dropped to 12.6% from 13.0%, and USDA applications slipped to 0.5% from 0.6%.
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