Mortgage rates moved even higher again last week, as the war with Iran continues to stoke fears of inflation. As a result, total mortgage application volume fell again, down 10.4% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, increased to 6.57% from 6.43%, with points remaining unchanged at 0.65, including the origination fee, for loans with a 20% down payment.

Applications to refinance a home loan, which are most sensitive to weekly interest rate moves, dropped 17% for the week and were 33% higher than the same week one year ago. Earlier this year, when rates were lower, refinance demand was more than twice what it was the year before.

“The 30-year mortgage rate, now at 6.57%, reached its highest level since last August and is up half a percentage point from just one month ago,” said Mike Fratantoni, MBA’s chief economist, in a release. “Refinance application volumes declined sharply again last week, and are down more than 40% compared to last month.”

Applications for a mortgage to purchase a home dropped 3% for the week and were just 1% higher than the same week one year ago. The spring housing market, traditionally the busiest of the year, is well underway. While it was forecast to be stronger than last year’s, the war is weighing on affordability and stoking fears over the direction of the overall economy.

“Purchase applications for FHA and VA loans continue to hold up better than those for conventional buyers. However, the shocks of the jump in rates and the increase in overall economic uncertainty are likely having an impact on buyer confidence,” said Fratantoni.

Mortgage rates came down pretty sharply to start this week, according to a separate measure from Mortgage News Daily, as markets digested a potential de-escalation in the Iran war. They are, however, still elevated compared with before the war.

“This marks the best 2 days of improvement since the war began, but the caveat is that the larger movements are often seen after rates hit longer-term highs,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.

Mortgage rates last week jumped to the highest level since the end of last year, causing a crash in the growing refinance demand the market had been seeing at the start of this year. That pushed total mortgage application volume down 10.9% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, increased to 6.30% from 6.19%, with points increasing to 0.63 from 0.58, including the origination fee, for loans with a 20% down payment.

“Mortgage rates continued to move higher, driven by increasing Treasury yields as the conflict in the Middle East kept oil prices elevated, along with the risk of a broader inflationary shock. Mortgage rates increased across the board,” said Joel Kan, an MBA economist in a release.

Applications to refinance a home loan plunged 19% week-to week but were still 69% higher than the same week one year ago.

“Rates were around 20 basis points higher than they were two weeks ago, and this caused a reversal in refinance activity, particularly for conventional refinance applications, which decreased 27 percent over the week. Government refinances also declined but by 5 percent, as FHA rates have not increased quite as rapidly,” Kan added.

Applications for a mortgage to purchase a home managed to eke out a 1% gain for the week and were 12% higher than the same week one year ago. The all-important spring housing market, which officially begins at the end of this week, is kicking off with slightly more inventory than last year, and interest rates are still 42 basis points lower than they were a year ago.

Affordability is improving, with prices now dropping in some markets and flat in others compared with last spring.

Mortgage rates moved slightly lower to start this week, according to a separate survey from Mortgage News Daily. While most Federal Reserve watchers do not expect the central bank to cut its interest rate at the open market committee meeting today, there is always a possibility that commentary from the chairman could move bond markets.

“Fed days can still cause volatility in rates, for better or worse. In [Wednesday’s] case, any impact from the Fed should be smaller than it otherwise would have been due to the market’s preoccupation with geopolitical influences,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.

Mortgage rates dropped sharply last week, and while that helped to prolong gains in refinancing, homebuyer demand seemed unimpressed.

Total mortgage application volume was essentially flat, rising just 0.4% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, decreased to 6.09% from 6.17%, with points falling to 0.53 from 0.56, including the origination fee, for loans with a 20% down payment. That was the lowest level since September 2022.

Applications to refinance a home loan increased 4% last week from the week before and were 150% higher than the same week one year ago, when rates were 79 basis points higher. Refinancing has been on a bit of a tear lately, as rates drop. While the comparisons to a year ago are quite large, it is important to take into account that refinancing was quite low at this time last year.

Applications for a mortgage to purchase a home dropped 5% for the week and were 12% higher year over year. While lower mortgage rates are improving affordability, home prices are still slightly higher than they were at this time last year and economic uncertainty is weighing heavily on consumers.

Redfin cited this uncertainty in a report showing that nearly 40,000 home sale agreements nationwide were canceled in January, equal to 13.7% of homes that went under contract. That’s up from 13.1% a year ago and the highest January share in records dating to 2017.

Borrowers also sought more savings in adjustable-rate mortgages, which are slightly riskier but offer lower rates.

“The ARM share stayed above 8 percent, as ARM rates remained more than 80 basis points below conforming fixed rates,” said Joel Kan, an MBA economist, in a release. “This is giving payment-sensitive borrowers or those seeking larger loans, an incentive to choose this product offering.”