Rising borrowing costs are slowing home purchases and refinancing as buyers wait for better affordability
Washington, D.C., 27 August 2026 – The U.S. housing market is facing another period of caution as higher mortgage rates continue to weigh on homebuyer demand. New data from the Mortgage Bankers Association (MBA) shows that mortgage application activity declined during the week ending August 21, signaling that many buyers and homeowners remain hesitant to take on new loans at current borrowing costs.
The MBA’s seasonally adjusted Market Composite Index, which tracks total mortgage application volume, fell 1% from the previous week. On an unadjusted basis, applications dropped 2%. The decline came as the average rate on a 30-year fixed conforming mortgage increased slightly to 6.78%, its highest level in three weeks.
For consumers, even a small increase in mortgage rates can make a noticeable difference in monthly payments. This is particularly important in a housing market where home prices and financing costs continue to challenge affordability.
Home purchase activity showed limited movement during the week. The MBA’s seasonally adjusted purchase index slipped 0.3%, while the unadjusted measure declined 2%. Purchase applications were also 5% lower than they were during the same period last year.
The slowdown is especially significant for first-time homebuyers. Applications for Federal Housing Administration loans, which are commonly used by buyers with smaller down payments, fell 7% during the week. FHA loans represented 16.2% of total applications, compared with 17.1% the previous week.
Refinancing activity also remained under pressure. Refinance applications declined 2% from the previous week and were 17% below their level a year earlier. Although refinancing accounted for 42% of all mortgage applications, the share was slightly higher mainly because purchase demand weakened.
The size of refinance loans also fell to its lowest level since June 2025. This suggests that the borrowers still refinancing are increasingly those with smaller loan balances or specific financial reasons to change their mortgage terms rather than homeowners broadly taking advantage of lower rates.
Other mortgage products also became more expensive. The average rate for a 30-year jumbo mortgage rose to 6.73%, while the 15-year fixed mortgage rate increased to 6.10%. The average rate for a 5/1 adjustable rate mortgage climbed to 5.98%. FHA-backed 30-year fixed mortgage rates also edged higher to 6.46%.
Adjustable rate mortgages accounted for 7.9% of applications, showing that some borrowers are exploring alternatives to traditional fixed rate loans in an effort to reduce their initial monthly payments. However, these loans can carry different risks because their interest rates may change over time.
The latest figures point to a housing market that is improving slowly rather than experiencing a broad recovery. While housing inventory has become less restrictive in some markets, elevated mortgage rates continue to limit purchasing power. Earlier expectations for meaningful rate relief have also become less certain, keeping affordability at the center of the U.S. housing outlook.
For buyers, the current environment means carefully comparing mortgage options, considering monthly affordability and watching rate movements before making a major commitment. For sellers, weaker mortgage demand could mean that attracting buyers may take longer, particularly in markets where home prices remain high.
The August mortgage application data ultimately sends a clear message: Americans are still interested in buying homes, but many are waiting for financing conditions to become more comfortable. Until mortgage rates fall more significantly, the U.S. housing market may continue to move at a measured pace.
