Mortgage loan application volumes in the U.S. decreased for the week ending Dec. 12, as rising interest rates dampened demand for both refinancing and home purchases, according to the most recent survey from the Mortgage Bankers Association (MBA).

The MBA’s Market Composite Index, a measure of mortgage loan application volume, fell 3.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index decreased 5% compared to the week prior.

The association’s Refinance Index decreased 4% from the previous week, although it remains robust compared to historical data, standing 86% higher than the same week a year ago.

The unadjusted Purchase Index dropped 7% week over week yet remained 13% higher than the same week in 2024.

Mike Fratantoni, MBA’s senior vice president and chief economist, attributed the slight decline in applications to the market reaction following the recent Federal Open Market Committee (FOMC) meeting.

“Mortgage rates inched up last week following the FOMC meeting, as investors interpreted the comments to signal that we are near the end of this rate cutting cycle,” he said.

Although the Fed reduced the federal funds rate by 0.25% for the third meeting in a row, policymakers signaled this might be the last cut for the foreseeable future, with multiple Fed officials formally dissenting.

Fratantoni also noted seasonal factors influencing the data. “Purchase application volume typically drops off quickly at the end of the year, and this shifts the mix of the business,” he said.

As a result of this seasonal drop, the refinance share of mortgage activity increased to 59% last week, up from 58.2% the week before and the highest level since September.

The survey reported notable movements in interest rates across loan types. The average contract interest rate for 30-year fixed-rate mortgages ticked up from 6.33% to 6.38%, according to MBA data, with points rising two basis points, to 0.62 from 0.60, for 80% loan-to-value ratio (LTV) loans.

The adjustable-rate mortgage (ARM) share of activity increased to 7.2% of total applications.

Regarding government-backed loans, the Federal Housing Administration share of total applications decreased to 19.5% from 20.2% the week prior, while the Department of Veteran Affairs share increased to 16.6% from 16.4%. The U.S. Department of Agriculture share crept up 0.4%.

The survey covers U.S. closed-end residential mortgage applications originated through retail and consumer direct channels. The MBA has collected the data weekly since 1990.