Last week, a crucial indicator of home purchase applications fell as consumer demand slowed in the face of rising mortgage rates.
According to recent information released on Wednesday, the Mortgage Bankers Association’s index of mortgage applications dropped 4.6% last week to reach its lowest point since February.
According to Joel Kan, MBA’s deputy chief economist, “mortgage applications decreased by almost 5% last week as borrowers remained sensitive to higher rates.” “We have yet to see sustained growth in purchase applications because rates have been so unstable and for-sale inventory is still scarce.”
According to the poll, the demand for refinancing dropped by further 5% last week. Refinance applications are down more than 40% from this time last year.
The Federal Reserve’s aggressive tightening campaign has caused the interest rate-sensitive housing market to rapidly cool.
Following a barrage of stronger-than-expected economic statistics, policymakers increased the benchmark federal funds rate for a record 10-consecutive increases and left the door open for another increase at their June meeting.
Higher mortgage rates have slowed consumer demand and lowered property prices for months. Rates have gradually decreased since reaching a top of 7%, and the housing market has already begun to show signs of life.
The transition back to lower mortgage rates, nevertheless, has not been easy. In fact, rates increased noticeably to begin the week, jumping to 6.91%, according to a second MBA study.
Prior to reaching an agreement to raise the federal debt ceiling and prevent the first-ever default, the increase occurred. The proposal, which has encountered opposition from both sides of the aisle, still needs to be passed by Congress.
Limited inventory has also bolstered demand and prices this month.
According to a recent survey from Realtor.com, there were significantly fewer houses on the market in March than there usually were before the pandemic started.