The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) in the US rose by 6 basis points to 6.92% in the week ended May 16th, 2025, marking the highest level in three months, according to the Mortgage Bankers Association (MBA).
US mortgage rates at three-month high
This increase in borrowing costs mirrored a broader rise in Treasury yields, driven largely by renewed investor concerns over persistent inflationary pressures and the expanding federal deficit. “Investors are increasingly wary of the inflation outlook and the long-term implications of ballooning government debt,” noted Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. For comparison, mortgage rates stood slightly higher at 7.08% during the same period last year.
Mortgage application volumes decline
As interest rates crept closer to the 7% mark, mortgage application volumes in the US declined sharply, falling 5.1% from the previous week—the steepest weekly drop in over a month. The decline reflects both affordability challenges for potential homebuyers and diminished incentive for current homeowners to refinance. Specifically, applications for a mortgage to purchase a new home declined by 5%, while applications for refinancing—a segment typically more sensitive to rate fluctuations—also fell by 5%. The broader housing market continues to face headwinds, as elevated rates, tight inventory, and economic uncertainty weigh on both demand and sentiment.
