Mortgage applications declined last week as rising borrowing costs and economic uncertainty continue to suppress home purchase demand this summer, the Mortgage Bankers Association (MBA) reported Wednesday.

The MBA’s Market Composite Index, a measure of mortgage loan application volumes, slipped 1% on a seasonally adjusted basis over the week ending Aug. 21, while the unadjusted purchase index remained below year-ago levels for the fourth consecutive week.

Refinance demand fell 2% over the week to land 17% lower than the same week a year ago, while the seasonally adjusted purchase index declined 0.3% from the previous week.

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Purchase applications were 5% below last year’s pace, said Joel Kan, deputy chief economist of the MBA, in commentary accompanying the weekly report.

“Mortgage rates reached their highest level in three weeks,” said Kan, “with the 30-year fixed rate up slightly to 6.78%.” After starting the year around 6%, typical 30-year rates have been above 6.5% for 15 consecutive weeks, amid inflationary impacts from the Iran war and shifting supply and demand dynamics in the bond market.

Average 30-year rates held around 6.77% over the first two weeks of August, down from 6.81% in the last week of July, according to MBA data.

On aggregate, mortgage application volumes have declined during four out of the past five weeks, and six out of the past eight, according to MBA data. Over that two-month span, average mortgage rates have risen 0.2%, Wednesday’s report indicated, eroding borrower purchasing power and sapping refinance demand.

As a share of overall mortgage activity last week, refinances accounted for 42% of application volumes, on par with the previous week.

Kan noted that refinance applications for government mortgages backed by the Federal Housing Administration (FHA) and Department of Veteran Affairs (VA) exhibited particular weakness, with FHA purchase applications declining 7%.

The average mortgage rate for 30-year fixed-rate FHA loans rose slightly to 6.46% from 6.45% the previous week. As a result of weak demand across government programs, the application share of FHA loans fell to 16.2% of overall activity from 17.1% the prior week. VA applications share held steady, however, increasing to 12.8% from 12.6% previously.

Recently revised housing forecasts from the MBA suggest mortgage lenders will continue to face challenging market conditions through the end of 2026 and well into 2027.

Economists for the trade group project yields on 10-year U.S. Treasury bonds will remain around current levels near 4.7% through the end of next year, supporting average mortgage rates of 6.7% through the end of 2026 and the duration of 2027.