Mortgage demand has experienced a sharp decline due to higher interest rates and economic uncertainty. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume fell by 12.7% last week compared to the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $806,500 or less increased to 6.90%, up from 6.81%. This marks the highest rate in two months but remains 34 basis points lower than the same week last year. Rates have risen nearly 30 basis points in just two weeks.
Refinancing applications dropped by 20% for the week but were still 43% higher than the same week last year. The refinance share of mortgage activity decreased to 37.3% of total applications from 41.3% the previous week. Applications for purchasing a home fell by 7% for the week and were only 6% higher year-over-year. Homebuyers are facing challenges beyond higher interest rates, including rising home prices and a recent stock market plunge that has made some reluctant to sell stocks for down payments.
“Economic uncertainty and rate volatility impacted prospective homebuyers,” said Joel Kan, vice president and deputy chief economist at the MBA. Mortgage rates moved higher on Monday but then stalled on Tuesday, according to a separate survey from Mortgage News Daily.
“Headlines regarding Trump’s comments about Fed Chair Powell rattled the market and sent rates lurching higher,” wrote Matthew Graham, chief operating officer at Mortgage News Daily on Tuesday. “Now, 24 hours later, an absence of any additional escalation has given way to calmer market movement and generally flat interest rates.”
— new from CNBC