Higher interest rates and inflation make it hard for people to buy homes, so Mortgage Demand Drops to a 22-year low. The seasonally adjusted index from the Mortgage Bankers Association shows that the demand for mortgages hit its lowest level since 2000.
As higher interest rates and inflation hit American consumers, the mortgage market is only getting worse.
The Mortgage Bankers Association’s seasonally adjusted index shows that Mortgage Demand Drops more than 6 percent last week compared to the week before. This is the lowest level since 2000.
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The number of people applying for a mortgage to buy a home went down by 7% last week and was 19% less than the same week in 2021. Buyers have had to deal with high prices all year, but now that interest rates are almost twice what they were in January, they have a lot less money to spend.
“Purchases have gone down for both conventional loans and government loans because of the weakening economic outlook, high inflation, and ongoing problems with affordability,” said MBA economist Joel Kan.
Even though buyers are less affected by weekly changes in interest rates, rising rates as a whole have already hurt them. Last week, mortgage rates went up again after going down slightly over the past three weeks.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $647,200 or less went up from 5.74 percent to 5.82 percent. For loans with a 20% down payment, the number of points went up from 0.59 to 0.65, and the origination fee went up from 0.59 to 0.65. A year ago, that rate was 3.11 percent during the same week.
Demand for refinancing, which is very sensitive to interest rates, dropped 4% last week and was 80% lower than the same week last year. These applications are also at a 22-year low, but because the number of people buying homes dropped, the number of people refinancing their mortgages went up from 30.8 percent to 31.4 percent of all applications.
This week, mortgage interest rates haven’t changed much, but that could soon change because the bond market is becoming more volatile. Next week, the Federal Reserve is likely to raise interest rates by another 75 basis points. Other central banks are also taking steps to fight inflation. A basis point equals 0.01 percent.
“This is especially true next week when the markets are digesting the latest Fed policy announcement on Wednesday,” said Matthew Graham, chief operating officer of Mortgage News Daily. “But the European Central Bank’s policy announcement on Thursday could also cause enough of a stir to change U.S. rates.”
