US Mortgage Rates Reach Five-Month High, Impacting Home-Purchase Applications

In the week ending April 19, US mortgage rates surged to their highest level in five months, leading to a decline in home-purchase applications for the fifth time in six weeks.

According to data from the Mortgage Bankers Association released on Wednesday, the contract rate on a 30-year fixed mortgage rose by 11 basis points to 7.24%, marking the highest rate since Nov. 24. This increase contributed to a 1% drop in the index of mortgage applications for home purchases.

The overall index of mortgage applications, which includes applications for both home purchases and refinancing, also saw a decline, falling by 2.7% last week. Refinancing, in particular, experienced a significant decrease of 5.6%, the largest drop since February.

The rising borrowing costs above 7% have created a noticeable gap between the resale market and the new-home market. Sales of previously-owned houses are struggling to gain traction as potential buyers wait for interest rates to decrease, leading to limited listings and higher prices.

However, homebuilders have been able to capitalize on the tight resale inventory. Some firms are driving sales by offering more affordable financing options and incentives. This strategy has helped boost new-home sales, which rebounded strongly last month to their fastest pace since September.

The Mortgage Bankers Association’s survey, conducted weekly since 1990, gathers responses from mortgage bankers, commercial banks, and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.