Rising long-term bond yields have pushed US mortgage rates to their highest level in over a year, causing a significant drop in overall mortgage market demand, with all loan application figures falling below last year's levels.

Data from the Mortgage Bankers Association (MBA) shows that the average contract rate for a 30-year fixed-rate mortgage conforming to loan limits ($832,750 or less) has climbed from 6.76% to 6.81%. This rise led to a 2.9% week-over-week decrease in total mortgage application volume, and a 5% year-over-year decline, marking the first annual drop for this indicator since April.

Breaking down the figures, refinance applications fell 2% week-over-week and were down 9% year-over-year. Purchase mortgage applications decreased 4% week-over-week and 3% annually. MBA Chief Economist Mike Fratantoni noted that long-term rates have continued to climb following the July Federal Open Market Committee (FOMC) meeting, pushing mortgage rates to elevated levels. He emphasized that the concurrent decline in both refinance and purchase loan applications indicates that high borrowing costs have substantially weakened overall market demand.

Analysts widely believe that while housing supply has increased somewhat, home prices remain stubbornly high. Expensive financing costs have largely offset any potential bargaining power buyers might gain in the market, further suppressing transaction activity. Additionally, industry monitoring data suggests a slight adjustment in rate trends recently. According to Mortgage News Daily, as the week began, signs of easing geopolitical tensions involving Iran and lower international oil prices have reduced pressure on the US bond market, leading to a modest dip in mortgage rates. Chief Operating Officer Matthew Graham of the firm stated that these changes in the external environment provide room for mortgage lenders to moderately lower rates, with the average 30-year fixed mortgage rate now at its lowest level in nearly two weeks.