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preCharge News BUSINESS — Higher interest rates, as well as concern over where the broader economy is headed, is causing mortgage demand to drop sharply. Last week, total mortgage application volume dropped 12.7% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.90% from 6.81%, with points increasing to 0.66 from 0.62, including the origination fee, for loans with a 20% down payment.

That is the highest rate in two months but still 34 basis points lower than the same week one year ago. Rates are up almost 30 basis points in just two weeks.

The rate increase hit refinance demand hard. Those applications dropped 20% for the week but were 43% higher than the same week one year ago. The refinance share of mortgage activity decreased to 37.3% of total applications from 41.3% the previous week.

Applications for a mortgage to purchase a home fell 7% for the week and were just 6% higher year-over-year. Homebuyers are contending with more than just higher interest rates. Home prices continue to climb, and the recent plunge in the stock market has some unwilling to sell stocks in order to make a down payment.

“Similar to the previous week, economic uncertainty and rate volatility impacted prospective homebuyers,” said Joel Kan, MBA’s vice president and deputy chief economist.

Mortgage rates moved higher Monday and then stalled Tuesday, according to a separate survey from Mortgage News Daily.

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Associated Press, CNBC News, Fox News, and preCharge News contributed to this report.

This is a developing news story. More information will be provided as soon as it becomes available.