The demand for mortgages is falling to almost half of what it was a year ago

Demand for mortgages continued to crumble last week as mortgage rates rose to the highest level since 2010. The total application volume fell 5% last week compared to the week before and was almost half of what it was a year ago, according to the Mortgage Council association seasonally adjusted index.

The average contract rate for 30-year fixed-rate mortgages with compliant loan balances ($ 647,200 or less) rose to 5.20% last week from 5.13%, with points rising to 0.66 from 0.63 (including the set-up fee) for loans with 20% payout. A year ago, the exchange rate was exactly 200 basis points lower at 3.20%.

“Ongoing concerns about rapid inflation and tighter US monetary policy continued to push government interest rates higher, bringing mortgage rates to the highest level in over a decade. Interest rates rose across the board for all types of loans,” said Joel Kan, MBA’s associate vice president of economic and industrial forecasts.

As interest rates now rise rapidly after a lengthy period in which they have hit record lows, very few borrowers are now able to benefit from refinancing. This demand therefore fell a further 8% for the week and was 68% lower than the same week a year ago. It marks six weeks in a row with declines in refinancing. The refinancing share of mortgage lending activity fell to 35.7% of total applications from 37.1% the previous week.

Mortgage applications to buy a home fell 3% for the week and were 14% lower than in the same week a year ago. The annual fall is now beginning to grow as housing becomes even more expensive.

“In a housing market facing challenges with affordability and low inventory, higher prices are also causing a pullback or delay in home purchase demand. Home purchase activity has been volatile in recent weeks and has yet to see the typical pickup for this time of year,” he added. Able to.

Buyers who are stuck in the market are turning more to adjustable rate loans now, which have a lower interest rate but which had been avoided as too risky after the last home crash. The ARM share of applications reached 8.5% last week, the highest level since 2019. ARMs can have fixed interest rates for terms like seven or 10 years, and are now drawn much more carefully than they once were.

Mortgage rates continued to rise this week as government interest rates rose. Higher rates now appear to hit the country’s homebuilders. A report Tuesday from the U.S. Census showed a drop in building permits for single-family homes. These are an indicator of the construction of the future. Builders also reported that they are now seeing much slower buyer traffic in their model homes, likely due to rising mortgage rates.

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