Weekly mortgage applications fell by 1.2% on a seasonally adjusted basis for the week ending May 23, according to the Mortgage Bankers Association (MBA).

The fall from the previous week’s application rate was partly due to a drop in refinancing applications, which were down 7% from the previous week but still 37% higher than this same week one year ago. While mortgage applications dropped, the MBA reported that purchase applications were up 3% from the week earlier and increased 18% from the same week last year.

“Mortgage rates reached [their] highest level since January, following higher Treasury yields. Additional market volatility has added to the increase, keeping the mortgage-Treasury spread wider than it was earlier this year. The 30-year fixed rate increased to 6.98%, its third consecutive weekly increase,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “As a result of these higher rates, applications activity decreased, driven by a 7% decline in refinance applications.”

Kan said that conventional refinances were down 6%, and refinancing for U.S. Department of Veterans Affairs loans dropped 16%. However, the one bright spot was that purchase applications continue to run ahead of last year’s pace as increased housing inventory has supported some transaction volume, despite the economic uncertainty.     

The refinance share of activity decreased to 34.6% of total applications, down from 36.6% the previous week. The Federal Housing Administration’s share of total applications remained unchanged at 17.9% from the prior week. The Veterans Affairs’ share of loans decreased to 12.3% from 12.6% the week before.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased to 6.98% from 6.92%. The average contract interest rate for jumbo loan balances (greater than $806,500) decreased to 6.93%, down one basis point from the previous week.