Mortgage demand has fallen to a 22-year low

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

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

Home mortgage applications fell 7% for the week and were 19% lower than the same week in 2021. Buyers have struggled with high prices all year, but prices are almost double what they were in January. lost considerable purchasing power.

“Purchasing activity for both conventional and government loans has weakened as the weakening economic outlook, high inflation and persistent affordability issues weigh on buyer demand,” said MBA economist Joel Kahn.

While buyers are less likely to be affected by weekly moves in interest rates, the broader picture of rising 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 loan balances ($647,200 or less) went from 5.74% to 5.82%, and scores went from 0.59 to 0 for loans with 20% down. increased to .65 (including employment fee). payment. This rate was 3.11% in the same week a year ago.

Demand for refinancing, which is highly sensitive to interest rates, fell 4% for the week and was 80% lower than the same week last year. Those applications are also at their lowest level in 22 years, but lower demand from homebuyers caused refinancing activity to rise to 31.4% of total applications from 30.8% in the previous week.

Mortgage rates haven’t changed much this week, but that could change very soon because of the hike 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 will take similar steps against inflation. A basis point is equal to 0.01%.

“This is true next week as markets digest the latest Fed policy announcement next week, but Thursday’s European Central Bank policy announcement will also be enough to weigh on U.S. interest rates,” noted Matthew Graham, chief operating officer of Mortgage News. can cause as much agitation,” he said. Daily.