A “For Sale” sign in Crockett, California, Tuesday, June 14, 2022.
David Paul Morris | Bloomberg | Getty pictures
As consumers worry more about inflation, fewer people buy homes – and if they do, they buy cheaper homes. Demand for mortgages fell last week compared with the previous week, and the average loan size also shrank.
Mortgage applications to buy a home fell 4% for the week and were 1[ads1]8% lower than the same week a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The MBA also included an adjustment for the Fourth of July holiday.
Buyers have retreated, partly due to higher mortgage rates, but prices remained stable last week. The average contract interest rate on 30-year fixed-rate mortgages ($ 647,200 or less) remained at 5.74%, with points falling to 0.59 from 0.65 (including the set-up fee) for 20% prepayment loans.
“Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the deteriorating economic outlook,” said Joel Kan, an MBA economist. “After reaching a record $ 460,000 in March 2022, the average purchase loan size was $ 415,000 last week, pulled down by potential moderation in house price growth and weaker buying activity in the upper end of the market.”
Applications to refinance a mortgage, which has been incredibly weak due to higher interest rates, rose 2% for the week, but were 80% lower than the same week a year ago. At the same time last year, the average mortgage rate was 3.09%. There are very few remaining borrowers who do not already have lower interest rates on their mortgages and who can benefit from a refinancing.