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The pain in the mortgage market is only getting worse as higher interest rates and inflation hammer American consumers.
Demand for mortgages fell more than 6% last week from the previous week, hitting the lowest level since 2000, according to the Mortgage Bankers Association̵[ads1]7;s seasonally adjusted index.
Mortgage applications to buy a home fell 7% for the week and were 19% lower than the same week in 2021. Buyers have struggled with high prices all year, but with prices almost twice as much as in January, they have lost significant purchasing power.
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“Purchasing activity fell for both conventional and sovereign loans as the weakening economic outlook, high inflation and persistent affordability challenges weigh on buyer demand,” said Joel Kan, an MBA economist.
While buyers are less affected by weekly interest rate movements, the broader picture of rising interest rates has already taken its toll. Mortgage rates rose again last week after falling slightly over the past three weeks.
The average contract rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) increased to 5.82% from 5.74%, with points increasing to 0.65 from 0.59 (including the origination fee) for loans at 20% decline. payment. This rate was 3.11% in the same week a year ago.
Demand for refinancing, which is highly interest rate sensitive, fell 4% for the week and was 80% lower than the same week last year. These applications are also at a 22-year low, but the fall in demand from home buyers saw the refinancing share of mortgage activity increase to 31.4% of total applications from 30.8% the previous week.
Mortgage rates haven’t moved much this week, but that could change very soon due to rising volatility in the bond market. The Federal Reserve is expected to raise interest rates by another 75 basis points next week, and other central banks are taking similar measures against inflation. One basis point corresponds to 0.01%.
“This is especially true next week as markets digest the latest Fed policy announcement next Wednesday, but Thursday’s policy announcement from the European Central Bank could also create enough excitement to affect US interest rates,” noted Matthew Graham, CEO of Mortgage News Daily.