Mortgage demand drops to 22-year low

The pain in the mortgage market is getting worse as high interest rates and inflation are hurting American consumers.

Mortgage demand last week fell more than 6% from the previous week, hitting its lowest level since 2000, according to the Mortgage Bankers Association’s seasonally adjusted index.

Mortgage applications to buy a home are down 7% during the week and are 19% lower than the same week in 2021. Buyers have been dealing with higher prices all year, but with rates nearly double what they were in January, they lost significant buying power. .

“Buying activity has decreased for both conventional and government loans as the weak economic outlook, high inflation and persistent challenges in affordability weigh on buyer demand,” said Joel Kahn, MBA economist.

While buyers are less affected by weekly moves in interest rates, the broader picture of price hikes has already taken its toll. Mortgage rates rose again last week after falling slightly over the past three weeks.

The average contract interest rate for 30-year fixed rate mortgages with matching loan balances ($647,200 or less) increased to 5.82% from 5.74%, with a score increase to 0.65 from 0.59 (including origination fees) for 20 percent loans. % low paying. That rate was 3.11% in the same week one year ago.

Demand for refinancing, which is highly rate sensitive, fell 4% during the week and was 80% less than the same week last year. These applications also hit a 22-year low, but the drop in demand from homebuyers caused the share of mortgage refinancing activity to increase to 31.4% of total applications from 30.8% in the previous week.

Mortgage rates haven’t moved much this week, but that could change very soon due to the increase Bond market volatility. 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. The base point is 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 cause enough buzz to affect US interest rates,” noted Matthew Graham, chief operating officer. In Mortgage News. daily.