Weekly mortgage demand from homebuyers tumbles 12%, as higher interest rates take their toll

On May 4, 2022, a sign advertising a house for sale was spotted in Alhambra (California).
Frederic J. AFP | AFP | Getty Images

While mortgage rates did fall slightly last week however, it has already caused severe problems in housing affordability. The Mortgage Bankers Association’s seasonally adjusted index shows that both purchase and refinance mortgage demand declined, which led to a 11% drop in total mortgage applications for the week.

In comparison to the same week a year ago, mortgage applications to buy a house fell 12% and 15% respectively. It was the first weekly decline in homebuyer interest since April’s third week. Since the beginning of the year mortgage rates have gone up by more than two percentage points. Meanwhile, home prices have increased over 20% in comparison to one year ago.

For loans with at least 20% down, the average 30-year fixed-rate interest rate on mortgages has fallen to 5.49% from 5.533%.

Consumers aren’t feeling particularly wealthy because of inflation.

Joel Kan, an MBA economics professor, stated that there is general uncertainty regarding the future economy and recent market volatility which may cause some families to put off their search for homes.

The number of applications to refinance home loans fell another 10% from week to week. The week prior to this was 76% less than that of one year earlier. Inflation rates have been at an all-time low for the past two years. the Covid pandemicIncited a refinance boom that has since gone bankrupt. A refinance is only possible for a select few borrowers.

While it dropped slightly over the previous week, the adjustable rate mortgage portion of total applications was still high at 10.5%. This was 3% in January. The interest rate on ARMs is lower and they can have a fixed rate of up to 10 year.

The mortgage rate rose once again Tuesday after strong retail sales data, and remarks from Jerome Powell, Federal Reserve Chairman, which said that the Fed would continue to raise interest rates until inflation fell.

According to a Tuesday report from national homebuilders, the weekly decline in mortgage demand by homebuyers is consistent with an additional Tuesday report. They reportedAccording to the National Association of Home Builders, there was a significant drop in buyer traffic as well as current sales conditions. The lowest levels of Builder Sentiment in almost two years.

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