Mortgage application activity in the United States saw a marginal decline last week as borrowing costs nudged higher, influencing refinance demand while purchase applications showed resilience. According to the Mortgage Bankers Association’s (MBA) weekly survey for the week ending August 22, 2025, the seasonally adjusted composite index fell by 0.5%, signaling a broadly stable housing finance market amid evolving economic conditions.
- Slight Decline in Mortgage Applications Reflects Shifts in Borrower Behaviour
- Mortgage Rate Trends: Incremental Increases and Market Implications
- Loan Type Market Shares Signal Changing Preferences
- Contextualising Market Activity Amid Broader Housing Trends
- Looking Ahead: Implications for Borrowers and the Housing Market
- Mortgage Market in 2025: A Snapshot
Slight Decline in Mortgage Applications Reflects Shifts in Borrower Behaviour
The MBA’s latest data reveal that total mortgage application volume remained nearly flat with only a fractional dip, underscoring a balance between competing forces in the housing finance sector. Refinancing activity experienced a 4% week-over-week drop, translating to a modest pullback after recent gains, while purchase applications rose 2%, marking their strongest weekly increase in over a month.
Joel Kan, MBA’s Vice President and Deputy Chief Economist, explained the dynamics: “Mortgage rates inched higher for the second straight week, with the 30-year fixed-rate mortgage rising to 6.69%. Although this increase was slight, it was sufficient to cause a retraction in refinance applications. Meanwhile, purchase applications benefited from a small seasonal boost, increasing by 2%, alongside an uptick in average loan sizes to $433,400—the highest level in two months.”
The refinance index remains elevated, approximately 19% above the same period last year, indicating sustained interest in refinancing despite recent rate rises. Conversely, the purchase index is showing marked strength, now outpacing last year’s levels by 25%, reflecting ongoing demand in the property market.
Mortgage Rate Trends: Incremental Increases and Market Implications
Tracking mortgage rates by loan type provides insight into the current lending environment and borrower preferences:
- 30-Year Fixed Rate: Increased slightly from 6.68% to 6.69%, with points (fees) steady at 0.60.
- 15-Year Fixed Rate: Rose from 5.96% to 6.03%, points climbing from 0.70 to 0.77.
- Jumbo 30-Year Fixed: Marginal increase from 6.64% to 6.67%, while points fell from 0.60 to 0.44.
- FHA Loans: Rates declined slightly from 6.39% to 6.35%, though points rose from 0.66 to 0.80.
- 5/1 Adjustable Rate Mortgage (ARM): Dropped from 6.01% to 5.94%, with an increase in points from 0.63 to 0.68.
Notably, rates for 2025 hit new lows recently, offering potential relief for borrowers contemplating refinancing. “Today’s lower rates should help to reinvigorate refinance application demand,” Kan noted, emphasizing the sensitivity of refi activity to small fluctuations in mortgage costs.
Loan Type Market Shares Signal Changing Preferences
The distribution of mortgage application types also shifted subtly during the week:
- The refinance share of total mortgage applications declined to 45.3%, indicating that less than half of all mortgage applications stem from refinancing.
- Adjustable-rate mortgage (ARM) applications dipped to 8.4%, reflecting a modest decline in interest for variable rate products.
- Federal Housing Administration (FHA) loans maintained a steady share at 19.1%, while Veterans Affairs (VA) loans slipped slightly to 13.3%.
These splits suggest buyers and homeowners continue to favour fixed-rate products, with FHA products holding steady among first-time or lower-credit borrowers, and VA loans remaining an important financing option for eligible veterans.
Contextualising Market Activity Amid Broader Housing Trends
The current patterns in mortgage applications align with broader housing market dynamics characterized by moderate rate increases, tightening affordability, and constrained inventory.
Housing inventory in many regions has seen gradual improvement after a prolonged shortage, easing some pressure on home prices. This increased choice has likely supported purchase application growth despite rising rates. Meanwhile, slower home-price appreciation, relative to prior years, is providing additional relief to prospective buyers.
Economists highlight that rising mortgage rates tend to dampen refinancing activity more sharply than purchases. “Refinancing is very rate-sensitive, so even small upticks can trigger pullbacks,” explained Sarah House, Senior Economist at Wells Fargo. “Purchase activity is influenced by a wider range of factors including income growth, job security, and housing supply.”
Looking Ahead: Implications for Borrowers and the Housing Market
As the Federal Reserve’s monetary policy continues to influence interest rates, mortgage applications will likely fluctuate in response to changing borrowing costs and economic conditions. Should rates remain near recent lows or decline further, refinances may pick up, providing debt-service relief for many homeowners.
At the same time, sustained purchase demand driven by demographic trends, such as millennials reaching homebuying age, plus ongoing improvements in housing supply, could support market activity amid affordability challenges.
Industry stakeholders are watching key indicators closely. “We expect steady mortgage demand through the remainder of 2025, though the pace may moderate if rates climb further,” Kan said. He added, “Affordability constraints remain an important headwind, especially for first-time buyers.”
Mortgage Market in 2025: A Snapshot
- Mortgage applications are broadly stable, with refinancing pulling back slightly and purchase demand gaining.
- The 30-year fixed mortgage rate rose marginally to 6.69%, following weeks of gradual increases.
- Purchase applications are 25% higher compared to last year; refinance activity remains 19% above year-ago levels despite recent declines.
- Market share for fixed-rate loans remains dominant, with FHA and VA loan participation steady.
- Recent rate reductions may reinvigorate refinancing demand in coming weeks.
As Americans navigate a shifting interest rate and housing market environment, these modest moves in mortgage applications and rates will have important ramifications for household budgets, real estate markets, and the broader economy in the months ahead.
This report is based on the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending August 22, 2025, and includes insights from industry economists.
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