Mortgage rate-lock volumes plunged in July as borrowing costs surged amid renewed fighting in the ongoing Iran war, inflationary pressures and bond market volatility.

The market share of rate locks for loans eligible for sale to Fannie Mae and Freddie Mac also continued to soften last month, dropping to 47.3% and remaining below the 50% threshold for the fourth consecutive month, according to data published by Optimal Blue on Tuesday.

“A 26-basis-point rate increase was enough to pull both purchase and refinance volume meaningfully below June’s pace,” explained Mike Vough, senior vice president of corporate strategy at the hedging and market intelligence firm, in a press release.

More than four out of every five borrowers who locked a mortgage interest rate in July did so for a home purchase as opposed to a refinance.

Lock volumes ultimately fell 11% over the month as purchasing power weakened and median home values continued to climb. Rate-and-term refinance activity decreased 17% but was 3% higher than a year ago, while cash-out refinances slipped 5% from June.

Purchase lock volumes fell 12% in July but nevertheless remained 6% higher than a year ago, accounting for 81% of total locks as rising mortgage rates suppressed refinance demand.

Optimal Blue says mortgage rates for 30-year fixed-rate loans ended July around 6.72%, “essentially unchanged from a year ago.” The company’s rate-lock data covers slightly more than one-third of the U.S. mortgage market.

Nonconforming rate locks for loans that do not meet Fannie and Freddie’s underwriting guidelines rose to 20.8% of all activity in July, which included more than 10% share in non-qualified mortgage (non-QM) rate locks.

Non-QM locks were up 1.4 percentage points from June and two percentage points from a year ago, as challenging affordability conditions drive a need for more flexible underwriting standards.

Fannie and Freddie lock share was ultimately 495 basis points lower than a year ago, while lock share across the broader universe of nonconforming loans was 397 basis points higher.

Rate locks for loans insured by the Federal Housing Administration comprised nearly 19% of July activity, essentially flat from a year ago, while locks for loans backed by the Department of Veterans Affairs accounted for 12.3%.

“The market is still outperforming last year, but momentum remains fragile and highly dependent on where rates move next,” added Vought.

Amid broader economic volatility, spreads between 10-year U.S. Treasury yields and conforming 30-year mortgage rates managed to narrow by five basis points in July.

Despite high home prices and rising financing costs, Optimal Blue also reported that debt-to-income ratios were lower than a year ago across all major product channels.