Mortgage demand has fallen to its lowest level since 2018, even as interest rates decline

Single family home for sale in Encinitas, California.

Mike Blake | Reuters

Mortgage demand has fallen to its lowest level since December 2018, even after interest rates fell slightly last week.

Applications for a mortgage to buy a home fell 1% last week compared to the previous week, according to the seasonally adjusted Mortgage Bankers Association index. Trading volume was 14% lower than the same week a year ago.

Despite the slight decline, mortgage rates are much higher than they were at the beginning of this year.

That’s because the average contract interest rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) dropped to 5.33% from 5.46% with points down to 0.51 from 0.60 (including origination fees) for loans of 5%. 20% down payment.

“Mortgage rates fell for the fourth time in five weeks, as concerns about weak economic growth and heavy selling in the stock market drove down Treasury yields,” said Joel Kahn, MBA economist.

High interest rates and sharp home price gains are severely impacting affordability. Prices keep going up Because it is still there Too little show In the market, but different categories of buyers see different pictures.

“Demand is high at the higher end of the market, and the supply and affordability challenges are not as detrimental to these borrowers as they are to first-time buyers,” Kahn said.

The average contract interest rate for 30-year fixed-rate mortgages with hefty loan balances (greater than $647,200) fell to 4.93% from 5.02%. Jumbo loans are mostly held in investor and bank wallets, rather than sold to Fannie Mae or Freddie Mac. Lenders see themselves as less risky because the credit quality of the borrower they go to is generally higher.

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Home loan refinancing requests, which are more sensitive to price movements than purchase orders, fell 5% during the week and were 75% lower than the same week a year ago. Even with interest rates retreating from their high levels over the past few weeks, refinancing is no longer requested because many borrowers already went through the process when rates were at record low levels last year.

Mortgage rates started rising this week, according to a reading from Mortgage News Daily, due to volatility in global markets.

“High inflation in Europe and the easing of Covid-related lockdowns in China have weighed on bonds,” wrote Matthew Graham, COO of Mortgage News Daily.

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