U.S. mortgage application activity fell sharply in late May 2026 as borrowing costs climbed to their highest levels in nearly nine months, pressuring both refinancing demand and homebuyer affordability amid a still-resilient housing market.
The Mortgage Bankers Association said overall mortgage application volume dropped 8.5% in the week ended May 22 from the prior week on a seasonally adjusted basis, marking one of the steepest weekly pullbacks this spring. The decline was driven largely by a collapse in refinancing activity as mortgage rates continued their upward march.
The average contract rate on a standard 30-year fixed mortgage rose to 6.65%, up from 6.56% a week earlier and the highest level since August 2025. Rates on jumbo loans climbed to 6.68%, while FHA-backed mortgages increased to 6.31%.
The jump in financing costs triggered an 18% weekly decline in refinance applications, although refinancing activity remained modestly above year-earlier levels. Refinancing accounted for just 37.5% of total mortgage applications, down from 41.9% the previous week and the smallest share of overall activity since mid-2025.
“Borrowers pulled back quickly as rates moved higher,” Joel Kan, the MBA’s vice president and deputy chief economist, said in a statement, noting that refinancing demand weakened across nearly every major loan category.
Government-backed lending showed some of the sharpest contractions. Applications for Veterans Affairs loans plunged 34% from the prior week, while FHA refinance applications dropped 18%. Conventional refinance activity also weakened materially.
Purchase activity, however, proved comparatively resilient despite deteriorating affordability conditions. MBA’s seasonally adjusted purchase index slipped just 0.4% from the previous week and remained 5% above the same period a year earlier, suggesting underlying housing demand has not fully broken under the weight of elevated borrowing costs.
At the same time, the profile of active buyers continued shifting toward wealthier households. The average purchase loan size climbed to a record $473,600, reflecting diminished participation from lower-budget borrowers increasingly squeezed by higher monthly payments.
Adjustable-rate mortgages represented 9.4% of total applications, down slightly from the prior week, as borrowers showed limited appetite for variable-rate products despite rising fixed mortgage costs.
The share of FHA-backed applications edged down to 17.2% of total volume, while VA-backed loans declined to 13.2%. USDA loan activity remained minimal at 0.5% of applications.
The latest data underscores the growing tension in the U.S. housing market, where elevated mortgage rates continue to suppress refinancing incentives and erode affordability, even as limited housing supply and demographic demand provide ongoing support for home purchases.
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