Rate lock volumes tumbled in August as mortgage borrowing costs remained above year-ago levels, according to figures published Monday by Mortgage Capital Trading (MCT), a hedging and secondary markets advisory firm.

Pipeline activity ultimately slowed on a monthly and yearly basis, with total lock volumes down more than 4% from July and 6% from a year ago. Purchases were down nearly 4.7% in August to land about 2.7% lower than a year ago.

Rate-and-term refinances plunged more than 11% over the month and were 35% lower than a year ago. Cash-out refinance rate lock volumes, however, experienced monthly growth of about 4.7% — even as mortgage rates rose, potentially signaling financial stress among some consumers.

“The fact that cash-out is the one category moving higher tells you people may be reaching for a lump sum to get through today,” said Andrew Rhodes, head of trading at MCT, in a press release. Capturing that lump sum today, he added, may involve “the hope of refinancing into a lower rate down the road.”

Recent market indicators would suggest that mortgage rate relief will remain elusive in coming quarters, however, with the Federal Reserve poised to potentially raise the federal funds rate from its current range of 3.5% to 3.75% when Fed officials convene on Wednesday.

While the Federal Reserve does not set mortgage rates, yields on 10-year Treasury notes to which mortgage rates are benchmarked have risen precipitously over recent months, leading the Mortgage Bankers Association (MBA) and Fannie Mae to raise their mortgage rate projections as of August.

With mortgage rates for typical 30-year home loans averaging around 6.8% in August according to MBA data, economists for the trade group believe 30-year rates will still hover around 6.7% by the end of next year. Fannie Mae economists have forecast the same, projecting that 10-year Treasury yields will be around 4.9% at the end of 2027.

Tapping home equity becomes an increasingly attractive option, added Rhodes, in light of historically high student loan and credit card delinquencies, which rose to 10.3% and 12.8% during the second quarter ending in June. Accelerating inflation since the Iran war began in late February has also exacerbated an ongoing cost-of-living crisis.

The latest inflation data for August indicated that the pace of price increases has not slowed toward the Fed’s stated 2% target, leaving financial markets confident that the U.S. central bank will raise the federal funds rate on Wednesday.

But a resumption of Iran war hostilities in July and an uptick in key inflation measures last month — coinciding with yearly highs in mortgage rates — have flipped the script for financial markets yet again in 2026.

“The one-day, one-week, one-month lookback on this is a wild shift,” Rhodes remarked. “We went from a hike being essentially 50/50 to it being close to a lock in about four weeks.”