Weekly Mortgage Demand Declines Again as Interest Rates Reach a 22-Year High

Last week, mortgage rates experienced their third consecutive increase, reaching a 22-year high. Consequently, mortgage demand declined.

As per the seasonally adjusted index provided by the Mortgage Banker’s Association (MBA), total mortgage application volume was 29% lower compared to the same week last year.

For conforming loan balances ($726,200 or less), the average contract interest rate for 30-year fixed-rate mortgages rose to 7.16% from 7.09%. Points decreased slightly to 0.68 from 0.70, including the origination fee, for loans with a 20% down payment. This marks the third consecutive weekly increase and the highest level seen since October 2022, matching a similar high from 2001.

In a statement, Joel Kan, an economist at the MBA, mentioned that last week Treasury rates rose due to mixed inflation data and signs of resilience in the economy. This may pose a challenge to the Federal Reserve’s efforts to curb inflation.

Consequently, mortgage demand from homebuyers remained relatively unchanged on a weekly basis and was 26% lower compared to the same week last year. The share of adjustable-rate mortgage (ARM) applications did experience a slight increase, as ARM loans offer slightly lower rates, and buyers seek every opportunity for savings.

The volume of applications for mortgage refinancing decreased by 2% for the week and was 35% lower compared to the same week last year. In the previous year, the 30-year fixed rate was 5.45%, but in the year prior, it was in the 3% range. Therefore, a limited number of borrowers can currently benefit from a refinancing option.

Despite the overall decline in mortgage demand, applications for purchasing newly built homes are rising. Based on a separate report released by the MBA, these applications increased by 35.5% in July compared to the previous year. Furthermore, the share of applications for Federal Housing Administration (FHA) loans reached its highest level since May 2020 and has risen in four of the last five months. FHA loans are popular among first-time homebuyers due to their low down payment options.

Joel Kan added that the increasing trend in FHA loan applications indicates that more first-time homebuyers are considering newly built homes as an option, given the shortage of existing homes available for sale and the challenging affordability landscape.

This week, mortgage rates continued to climb, reaching an average rate of 7.26% for 30-year fixed-rate mortgages, according to Mortgage News Daily. This marks the highest rate since November of last year.