Mortgage application activity edged lower last week as borrowing costs rose to their highest level in three weeks, adding fresh pressure to a housing market already struggling with subdued purchase demand and limited refinancing incentives.
The Mortgage Bankers Association’s seasonally adjusted Market Composite Index, which tracks U.S. mortgage-loan application volume, fell 1.0% in the week ended August 21, 2026. On an unadjusted basis, applications declined 2% from the prior week, according to the trade group’s weekly survey released Wednesday.
The pullback reflected weakness across both major categories of mortgage demand. Applications to refinance declined 2% from the previous week and were 17% below their level a year earlier. The seasonally adjusted purchase index slipped 0.3%, while the unadjusted measure dropped 2% and stood 5% below the same period in 2025.
The figures underscore how the recent upward drift in mortgage costs continues to restrain a housing market that has yet to establish a durable recovery. The average contract rate on a 30-year fixed conforming mortgage rose to 6.78% from 6.77%, the highest in three weeks, MBA data showed. Rates have climbed about 20 basis points over the past two months, according to Joel Kan, the association’s vice president and deputy chief economist.
“Mortgage rates reached their highest level in three weeks,” Kan said, noting that the increase has weakened the economics of refinancing for many existing homeowners. The average size of refinance loans fell to its lowest level since June 2025, an indication that higher-rate borrowers and smaller-balance loans are accounting for a greater share of the remaining activity.
Refinancing nevertheless represented 42.0% of all applications, up marginally from 41.9% a week earlier, largely because purchase demand also weakened. Adjustable-rate mortgages accounted for 7.9% of applications, an increase from the prior week as borrowers continued to look for ways to lower initial monthly payments relative to conventional fixed-rate loans.
Government-backed lending showed a more mixed pattern. Federal Housing Administration loans accounted for 16.2% of applications, down from 17.1% a week earlier, while Veterans Affairs loans increased to 12.8% from 12.6%. The Agriculture Department’s rural-housing loans remained at 0.5% of total applications.
Kan said purchase applications were weighed down by a 7% weekly decline in FHA demand. That weakness matters because FHA lending is often associated with first-time buyers and households with smaller down payments–segments that can be especially sensitive to changes in mortgage rates, home prices and monthly payment affordability.
Borrowing costs rose across most loan categories. The average rate for 30-year jumbo mortgages increased to 6.73% from 6.71%, while the 15-year fixed rate climbed to 6.10% from 6.08%. The average rate on a 5/1 adjustable-rate mortgage rose to 5.98% from 5.94%. Rates for FHA-backed 30-year fixed mortgages increased to 6.46% from 6.45%.
Fees also moved higher for several products. Points on conforming 30-year fixed loans increased to 0.66 from 0.65, and points on jumbo mortgages rose to 0.50 from 0.48, both for borrowers making 20% down payments. MBA said effective rates increased across each of the loan categories it tracked.
The latest report suggests that the modest easing in mortgage costs earlier in the year has not been enough to unlock a broad resurgence in homebuying or refinancing. Purchase applications have now trailed last year’s pace for two consecutive months, while refinance activity remains sharply below year-ago levels–leaving the market highly dependent on a more sustained decline in rates to revive transaction volume.
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