Mortgage rates are doing the thing nobody wanted them to do, with the 30-year fixed back to levels last seen nine months ago.
The people who would have refinanced just walked away.
The average 30-year fixed rate on conforming loans, which means loans of $832,750 or less, climbed to 6.65% last week, up from 6.56% the week before. It has risen 30 basis points over the past five weeks, according to the Mortgage Bankers Association.
Refinance applications dropped 18% in a single week, with some loan types hit even harder. VA refis fell 34%, FHA refis fell 18%, and conventional refis fell 14%.
Refis now make up just 38% of all mortgage applications, the lowest share since June 2025.
There is one twist, though, because refi demand is still 19% higher than the same week a year ago, when rates were even higher.
That comparison is the key for investors watching housing-linked stocks, since rates moving above last year's level would erase the year-over-year gain.
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Buyers pulled back too, but only a little, with purchase applications falling less than 1% week over week. The bigger story is who is still buying.
The average purchase loan size hit $473,600, another survey high. Smaller borrowers, the ones who feel every rate move first, are getting squeezed out.
Joel Kan, the MBA's deputy chief economist, said borrowers with smaller loan sizes are "less active given the higher rate environment and its negative impact on their purchasing power." In plain English, high rates are sorting the housing market by wallet size.
For investors, the read-through goes beyond homebuilders, because mortgage rates also move with Treasury yields, which tie back to what the bond market expects from the Federal Reserve.
Rates moved slightly lower to start this week, according to Mortgage News Daily. Investors saw the chance of a de-escalation in the war with Iran, bond yields dropped, and mortgage rates followed.
That is the new dynamic, with mortgage rates now moving on every headline out of the Middle East. Builders, brokers, and bank stocks all feel the move at the same time.
There is one more wrinkle that gets less attention. The points borrowers are paying climbed to 0.65 from 0.60 last week, which is real money on a $500,000 loan.
Points are an upfront fee a borrower can pay to lower the rate on a loan. When points rise alongside rates, the effective cost of a mortgage rises faster than the headline number alone suggests.
That extra cost is one reason refi applications fall off a cliff so quickly when rates move higher, since the math has to work after points and fees, not just the quoted rate.
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