By Alice Seeley
Demand for mortgages fell last week as the average interest rate on the average home loan rose to a nearly 13-year high, according to a new report from the Mortgage Bankers Association.
According to the Mortgage Bankers Association (MBA), applications for mortgages decreased by 12% on a weekly basis and are down 15% compared with the same week one year ago. This is the first time that the monthly mortgage demand fell in three weeks.
“Purchase applications fell 12% last week, as prospective homebuyers have been put off by the higher rates and worsening affordability conditions,” said Associate Vice President of Economic and Industry Forecasting at MBA, Joel Kan. “General uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search.”
The weekly drop-in homebuyer mortgage demand coincided with a report from the National Association of Home Builders that showed a considerable decline in both buyer traffic and current sales conditions. Builder sentiment has dropped to its lowest level in almost two years.
While mortgage rates are rising, refinance activity is declining. Refinancing applications decreased an additional 10% week to week. Compared to one year ago, refinance demand is down by 76%.
There were two years of record-low interest rates during the pandemic, which caused a refinancing boom. As of right now, there is not a large group of borrowers who can benefit from refinancing.
This new data comes as the Federal Reserve attempts to cool down the housing market and inflation. However, according to mortgage financier Freddie Mac after the 50-basis point increase by the Federal Reserve in May, mortgage rates jumped to 5.3% on Tuesday, May 17. Federal Chairman Jerome Powell responded to this data, saying the Fed will not hesitate to continue boosting interest rates until inflation comes down.
