Mortgage demand decreases as interest rates rise

  • Mortgage demand fell for the third week in a row as interest rates rose.
  • Mortgage applications for a home purchase fell 6% last week compared to the previous week.
  • Mortgage rates rose half a percentage point in the past month.

A potential buyer with her realtor views a home listed for sale during an open house in Parkland, Florida.

Carlin Jane | Tribune News Service | Getty Images

Mortgage rates rose again last week, again pushing buyers to the sidelines just as the spring housing market should be hotter.

Mortgage applications for a home purchase fell 6% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Trading volume was 44% lower than in the same week a year ago, and now remains at a 28-year low.

This is because the average contract interest rate for 30-year fixed-rate mortgages with matching loan balances ($726,200 or less) rose to 6.71% from 6.62%, with the score increasing to 0.77 from 0.75 (including origination fees) for loans. 20% down payment. This is the highest rate since November last year.

Mortgage rates have increased by 50 basis points in the past month alone. Last February, rates were in the 4% range.

“Data on inflation, employment and economic activity indicated that inflation may not subside as quickly as expected, which continues to put upward pressure on rates,” said Joel Kahn, an MBA economist.

Home loan refinance applications were down 6% for the week, and down 74% year over year.

“Refinance applications account for less than a third of all applications and remain more than 70% behind last year’s pace, as the majority of homeowners are already locked into lower rates,” Kahn added.

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Mortgage rates didn’t do much to start this week, but the path now appears to be higher after a brief respite in January. Low rates to start the year caused a brief surge in homebuying, but mortgage demand from homebuyers this month seemed to point to a very slow spring ahead.

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