Update by order using cte not working, why?

I want to change serial of table by batch update. Since update do not contain order by, I used CTE, with clause, made a data set and issued update on the result, expected that it will do as I will.
But it update by Id not by my ordered set.
what is wrong with this update?

CREATE TABLE [dbo].[Test](
    [Id] [int] NOT NULL,
    [Serial] [nvarchar](10) NOT NULL
)
insert into Test values
(1, 1001),
(2, 1002),
(3, 1003),
(4, 1004),
(5, 1005),
(6, 1006),
(7, 1003)

declare @serial int, @Id int
set @Id =3
select @serial = Serial from Test WHERE Id=@Id
declare @new_serial nvarchar(10);
select @new_serial = cast(@serial as nvarchar(10));

;with Records as 
( 
    Select Id, Serial 
    , ROW_NUMBER() over
    (
        order by serial
    ) as RN 
    FROM [Test]
    where Id>@Id
)
UPDATE Records set
    [Serial] = cast(@new_serial as int),
    @new_serial = cast(@new_serial as int)+1

Here is what after insert exists:

+--+----+
|1 |1001|
|2 |1002|
|3 |1003|
|4 |1004|
|5 |1005|
|6 |1006|
|7 |1003|

Here is what we need:

+--+----+
|1 |1001|
|2 |1002|
|3 |1003|
|4 |1005|
|5 |1006|
|6 |1007|
|7 |1004|