The market index fell 3.7% to 197.4 for the week ending May 26 from a week earlier. A year ago, the index stood at 308.3.

Key details: Few homeowners saw an opportunity to refinance. The refinance index fell 6.9%

Home buyers were also discouraged by rising rates. The purchase index — which measures mortgage applications for the purchase of a home — fell 2.5% from the previous week.

The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 6.91% for the week ending May 26. That’s up from 6.69% the week before, the MBA said. 

The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 6.78%, up from 6.57% the previous week.

The 15-year rose to 6.41%, from the previous week’s 6.15%.

The rate for adjustable-rate mortgages fell to 5.39% from 5.73% previously.

The big picture: Homeownership is becoming even more expensive for home buyers. The latest surge in mortgage rates will likely dampen demand as buyers face higher costs when borrowing to purchase a home. 

And lower demand may depress home sales further. Presently, home buyers are struggling to find options as inventory of homes for sale remains low. Higher rates may push more people to wait out the current market until rates dip or supply improves.

What the MBA said: “Inflation is still running too high, and recent economic data is beginning to convince investors that the Federal Reserve will not be cutting rates anytime soon,” Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, said in a statement.

Market reaction: The yield on the 10-year Treasury note TMUBMUSD10Y, 3.648% was above 3.6% in early morning trading Wednesday.