Mortgage application volumes decreased again last week as mortgage rates surged to their highest levels in years, the Mortgage Bankers Association (MBA) said Wednesday.

Marking a third straight weekly decline, the MBA’s Market Composite Index (MCI), a measure of mortgage loan application volumes, slid 1.5% on a seasonally adjusted basis over the week ending Sept. 18.

Application levels for purchases and refinances both decreased, with the seasonally adjusted purchase index landing 1% lower than the previous week. Purchase applications were 11% lower than the same week one year ago.

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“Mortgage rates vaulted higher last week, with the 30-year fixed rate at 7.12% — the highest level since May 2024,” commented Mike Fratantoni, chief economist of the MBA, in the weekly report. The latest tally reflected adjustments for the Labor Day holiday.

Average contract mortgage rates that hovered slightly below 6.8% through the second half of July and all of August have moved considerably higher in recent weeks, driving a subsequent hit to mortgage demand that has steadily declined since April amid economic fallout from the ongoing Iran War.

Registering at 227.3 points last week, the MCI is at its lowest level since May 2025, when the index was gradually rising as mortgage rates steadily eased. Strong refinance demand in late 2025 and the first quarter of 2026 helped sustain multiyear highs in the MCI around 300 or higher from September through March.

Now, typical 30-year mortgage rates are at their highest level in more than two years, pushing refinance application volumes down 62% compared to the same week a year ago. The refinance share of mortgage activity was essentially flat from the previous week at slightly more than 39% of applications.

“With this week’s decline, the pace of refinancing fell to its slowest pace since February 2025,” Fratantoni noted Wednesday. Housing finance forecasts updated by the MBA this month show average mortgage rates ending the year around 6.8%.

As borrowing costs have climbed in recent weeks, adjustable-rate mortgages (ARMs) have increased in popularity, offering rates up to 1% lower than typical fixed-rate options, the MBA said.

ARM application share rose to nearly 10% last week from 8.4% during the prior period. Average mortgage rates for 5/1 adjustable loans — whereby a borrower pays a fixed mortgage rate for the first five years of the loan term, after which it adjusts on an annual basis — fell to 6.1% from 6.23% the previous week.

On the government side, the share of applications for government mortgages insured by the Federal Housing Administration fell to 16.7% as average mortgage rates for FHA loans increased to 6.78% from 6.62% the previous week. Applications for government loans backed by the Department of Veterans Affairs fell slightly to 12% of total applications.