Iran war-driven rate spike hit refis and rattled the spring buying season
Mortgage demand dropped in late March as the average 30‑year fixed rate jumped to 6.57%, slamming the brakes on a fragile spring recovery in applications and refinances.
The Mortgage Bankers Association’s latest weekly survey for the week ending March 27 showed total applications down 10.4% from the prior week, with refi volume tumbling 17% and purchase demand slipping 3% on a seasonally adjusted basis.
Refinance activity still ran 33% above year‑ago levels, but purchase applications were only 1% higher than the same week in 2025, underscoring how quickly higher borrowing costs have cooled momentum.
Refinance rout led the downturn
“The 30‑year mortgage rate, now at 6.57%, reached its highest level since last August and is up half a percentage point from just one month ago.
Refinance application volumes declined sharply again last week, dropping 17%, and are down more than 40% compared to last month,” said Mike Fratantoni, MBA’s senior vice president and chief economist.
“Seasonally adjusted purchase application volume also declined over the week, but only by 3%,” he said.
“The headwinds of higher rates are being offset somewhat by the buyer’s market in many parts of the country – there are more homes for sale than buyers have seen in some time. Moreover, purchase applications for FHA and VA loans continue to hold up better than those for conventional buyers. However, the shocks of the jump in rates and the increase in overall economic uncertainty are likely having an impact on buyer confidence.”
The refinance share of activity fell to 45.3% of total applications, from 49.6% the prior week, while adjustable‑rate mortgages made up just 8% of new applications.
FHA loans accounted for 19.5% of volume, VA loans 16.1%, and USDA loans 0.5%.
Mortgage rates edge closer to the 7% mark!
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Oil shock and bond market keep pressure on rates
Behind the spike in mortgage costs sat a bond market already on edge over the war with Iran and its impact on oil prices and inflation.
Since late February, the 10‑year Treasury yield has climbed roughly half a percentage point as crude prices pushed above US$100 a barrel and investors marked down the odds of near‑term Federal Reserve cuts.
Freddie Mac data showed the average 30‑year fixed rate climbing back above 6% in March, to around the mid‑6% range by the end of the month.
MBA officials recently warned that “higher‑for‑longer” oil prices are keeping Treasury yields and mortgage rates elevated, a dynamic echoed by other market analysts who pointed to renewed inflation fears as the conflict disrupted key shipping routes and energy infrastructure.
Volatile spring challenges brokers and borrowers
The reversal came just weeks after a modest pick‑up in activity when rates briefly moved closer to 6%. Earlier in March, MBA data showed applications rising about 3% week over week as some buyers tried to get ahead of further increases.
Brokers used that window to steer rate‑sensitive borrowers back into the market, even as affordability remained stretched.
With rates now north of 6.5%, brokers face a familiar balancing act: helping existing clients decide whether a still‑positive refi math justifies moving quickly, and guiding would‑be buyers through a market where more inventory has not yet translated into easier payments.
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