Mortgage application volumes fell last week as borrowing costs approached their highest levels since March, according to data released Wednesday by the Mortgage Bankers Association (MBA).

The MBA’s Market Composite Index (MCI), a measure of mortgage application volumes, declined 2.3% on a seasonally adjusted basis over the week ending May 15, led by a pullback in purchase mortgage demand and a sustained slowdown in refinance applications.

Inflationary impacts from the ongoing war in Iran have pushed mortgage rates notably higher in the 10 weeks since the conflict began in late February.

Nevertheless, prospective homebuyers have submitted purchase applications at a pace exceeding year-ago levels for roughly the past month, from early April through the first week of May. That resilience culminated in strong April pending home sales, which the National Association of Realtors reported Tuesday rose 3.4% on an annual basis last month.

But that momentum shifted last week as bond market concerns over elevated government debt and geopolitical pressures yanked mortgage rates to their highest levels since the early weeks of the Middle East conflict.

The purchase component index of the MCI fell 4% on a seasonally adjusted basis last week, though the unadjusted purchase index remained 8% higher than a year ago, reflecting the rate sensitivity of borrowers rather than a broad-based retreat.

“Ongoing concerns around inflation from higher fuel costs, combined with rising concerns over global public debt, pushed Treasury yields higher in the U.S. and abroad last week,” noted Joel Kan, deputy chief economist at the MBA, in Wednesday’s report.

“Overall applications were down to the lowest level in five weeks as purchase borrowers pulled back across conventional and government loan types,” Kan added, flagging an increase in adjustable-rate mortgage (ARM) applications that carry lower interest rates.

Amid the purchase slowdown, the refinance component index moved lower by just 0.1%, pushing the share of refinance activity slightly higher to nearly 42% of total applications from 40.8% the previous week. The ARM share of activity rose to 9.6% of total applications from 8.8% the week prior.

Compared to a seven-week high of 6.56% for average mortgage rates on 30-year fixed-rate conforming mortgages — up from 6.46% the previous week — average rates on 5/1 ARMs were 5.76% last week. With 5/1 ARMs, borrowers receive a fixed mortgage rate for the first five years of the loan term, with the rate adjusting once yearly after.

The share of applications for home loans insured by the Federal Housing Administration (FHA) was unchanged at 17.9% during the second week of May, while the share of applications for loans backed by the Department of Veterans Affairs declined slightly from 14.9% to 14.4%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.24% from 6.16% the prior week, according to MBA data.