Climbing U.S. mortgage rates appear to be having a minimal impact on the demand for loans.
The average 30-year fixed mortgage rate rose to 6.75% last week, up from 6.67% two weeks earlier. Similarly, the average contract rate for mortgages with conforming loan balances (up to $806,500) increased slightly to 6.84%, from 6.82% the week prior.
Despite rates reaching their highest level in a month, mortgage demand barely flinched. Total application volume rose 0.8% from the previous week, according to the Mortgage Bankers Association’s (MBA) seasonally adjusted index.
The MBA’s seasonally adjusted Purchase Index — which tracks weekly mortgage applications for home purchases — increased 3% from the week prior and was 22% higher than the same week a year ago.
Rising purchase applications have been “driven by conventional purchase loans, and continue to run ahead of last year’s pace,” Joel Kan, MBA’s Vice President and Deputy Chief Economist, said in a press release.
However, while overall application volume appears resilient, refinance applications declined 3% last week. The refinance share of total mortgage activity fell to 39.6%, down from 41.1% the previous week.
“With the 30-year fixed rate still too high to benefit many borrowers, refinance applications were down almost three percent for the week,” Kan added.
Meanwhile, the average purchase loan amount — the total borrowed to finance a home — fell to $426,700, its lowest level since January.
The reason mortgage demand remains resilient in the face of rising rates is not entirely clear. One potential factor: More homes are hitting the market. Over the past two years, 500,000 more sellers have listed their properties, according to Redfin. This marks a reversal of the previous downward trend in supply, which had persisted since record keeping began in 2013. As a result, sellers now outnumber buyers by a ratio of 3-to-1, the widest margin on record.
Why are mortgage rates ticking up again?
The recent uptick in mortgage rates appears to stem from renewed inflation concerns and uncertainty surrounding monetary policy.
The Consumer Price Index (CPI) rose 2.7% in the 12 months ending June 2025, according to the U.S. Bureau of Labor Statistics — an increase of 0.2% from the previous month. Persistent inflation weakens the Federal Reserve’s ability to cut interest rates later this year.
Bond markets appear to be anticipating a rise in federal interest rates, with 10-year Treasury yields approaching 4.5% last week, having briefly dipped below 4% in April. Rising yields push mortgage rates higher.
Yields are rising because if interest rates remain elevated for longer, the cost of servicing U.S. debt increases. That pushes bond prices down, which sends Treasury yields higher.
President Donald Trump’s “Big Beautiful Bill” may also be contributing to rising yields. The Congressional Budget Office estimates the legislation will add around $3 trillion to the national deficit over the next decade. Increased government spending can worsen inflation, making it more difficult for the Fed to ease monetary policy. Additionally, a growing deficit forces the government to issue more bonds, increasing supply and pushing yields upward.