Rising mortgage rates and economic uncertainty gave homebuyers cold feet last week, with applications to mortgage lenders coming in at the slowest pace since May, the Mortgage Bankers Association reported Wednesday.
The MBA’s Weekly Mortgage Applications Survey showed purchase loan applications were down a seasonally adjusted 12 percent last week compared to the week before, but still up 13 percent from a year ago.
“Treasury yields finished higher last week on average despite an intra-week drop, driven partly by renewed concerns of the impact of tariffs on the economy,” MBA Deputy Chief Economist Joel Kan said in a statement. “As a result, mortgage rates rose after two weeks of declines, which contributed to slower application activity.”
After climbing to 6.92 percent on May 21, rates on 30-year fixed-rate mortgages retreated in June as investors who fund most home loans placed bets that the Trump administration will back down from threats to impose higher tariffs and that inflation will continue to ease.
By July 1, rates had dropped to 6.64 percent, and homebuyers responded, scrambling to apply for mortgages during the week ending July 4 at the fastest pace in more than two years.
Now mortgage rates are on the rise again, with the latest reading of the consumer price index (CPI) showing annual inflation moving away from the Federal Reserve’s 2 percent goal in June for the second month in a row.
Economists say tariffs on imports — which currently average 18.7 percent — are being passed on to consumers in the form of higher prices.
The Trump administration has sent warning letters to more than two dozen countries that they’ll face higher tariffs beginning Aug. 1 if they don’t sign trade deals.
Mortgage rates trending up again
At 6.79 percent Tuesday, rates on 30-year fixed-rate mortgages are up 15 basis points this month and 31 basis points from a 2025 low of 6.48 percent registered on April 3. A basis point is one hundredth of a percentage point.
Mortgage rates climbed half a percentage point in a little more than a week following Trump’s April 2 “liberation day” announcement of plans to impose higher country-specific “reciprocal” tariffs on most U.S. trading partners.
The prospect of higher tariffs has driven up mortgage rates because investors in mortgage-backed securities (MBS) that fund most home loans are wary that they’ll rekindle inflation.
Federal Reserve policymakers have said they’re waiting to see what impact tariffs will have on inflation before resuming interest rate cuts they began last year.
Although the Trump administration has been pressuring Fed Chair Jerome Powell to lower rates or resign, the Fed doesn’t have direct control over Treasury yields or mortgage rates. When the Fed lowered the short-term federal funds rates by a full percentage point at the end of last year, mortgage rates moved up by the same amount.
Uncertainty over tariffs is also weighing on consumer sentiment. After hitting its highest level of the year in May, a Fannie Mae index tracking consumer sentiment toward housing dropped in June as Americans became more concerned about losing their jobs and less certain that mortgage rates will come down in the year ahead.
Mortgage lenders also tightened their underwriting standards in June, making fewer loans to borrowers with low credit scores, the MBA reported Tuesday.
The MBA’s Mortgage Credit Availability Index (MCAI), which analyzes data from ICE Mortgage Technology, fell by 1.3 percent to 103.7 in June. The index was benchmarked to 100 in March 2012.
“Credit availability decreased in June after six months of growth, primarily led by fewer programs with low minimum credit scores,” Kan said. “With the job market softening, and increasing mortgage delinquency rates, some lenders are tightening up their credit offerings.”
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