Mortgage demand is now roughly half of what it was a year ago as interest rates rise even more

Total mortgage application volume was 52.7% lower last week than the same week a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The sharp rise in interest rates is decimating the volume of refinancing, and these rates, along with exorbitant home prices and a shortage of homes for sale, are hitting demand from potential buyers.

Last week, the average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell from 5.40% to 5.65%, with points rising from 0.60 to 0.71 (including origination fees) for loans with a 20% down payment. This week they have risen again, with the average rate hitting 6.28% on Tuesday, according to a daily metric from Mortgage News Daily.

“Mortgage rates have tracked Treasury yields in response to higher-than-expected inflation and anticipation that the Federal Reserve will need to raise rates at a faster pace,” said MBA economist Joel Kan.

The weekly volume of mortgage applications rebounded slightly from the previous week, adjusted for the holidays. Refinance demand rose 4% for the week, but was 76% lower than the same week a year ago.

Mortgage applications from homebuyers rose 8% for the week, but were 16% lower than a year ago.

“Despite the rate increase, application activity rebounded after the Memorial Day holiday week, but remained 0.29% below pre-holiday levels,” Kan added.

The housing market is now shaken amid rising interest rates. After two years of record high rates, fueled by the Federal Reserve’s Covid-induced mortgage-backed bond purchases, house prices are overheating and affordability is now at an all-time low. Major real estate brokers, Redfin and Compass, both announced layoffs on Tuesday.

“Mortgage rates have risen faster than at any time in history. We could be facing years, not months, of fewer home sales, and Redfin still expects to thrive. the drop from $97 per share to $8 does not strain a company, I don’t know what’s going on,” Redfin CEO Glenn Kelman wrote on the company’s website.

Comments are closed.