Mortgage applications tumbled 12.7% last week as mortgage rates hit their highest levels in two months, the Mortgage Bankers Association said, citing its Weekly Mortgage Applications Survey.        

The average contract interest rate for conforming 30-year mortgages of $806,500 or less jumped to 6.90% from 6.81% the week before, while the rate for 30-year fixed-rate mortgages backed by the FHA rose to 6.56% from 6.52%.   

The increase in rates also drove a decline in refinancing activity, which fell to 37.3% of all mortgage applications from 41.3% the week before, MBA Vice President and Deputy Chief Economist Joel Kan noted in a press release. 

“Overall mortgage application activity declined last week, as rates increased to their highest level in two months. The 30-year fixed rate rose for the second straight week to 6.9%, an almost 30-basis-point increase over two weeks,” Kan said. “These higher rates drove a 20% drop in refinance applications, especially for higher-balance loans, with the average loan size falling substantially.  

“Similar to the previous week, economic uncertainty and rate volatility impacted prospective homebuyers, as we saw a 7% decline in purchase applications.”