Demand for mortgages reaches a 22-year low as interest rates rise

Mortgage demand fell to its lowest level in 22 years this week due to rising interest rates and a lack of inventory. Cool demand among potential home buyers.

The volume of mortgage applications fell by 6.5% for the week ending June 3, compared with the week before, according to the latest data from the Mortgage Association’s weekly survey.

The decline occurred when the average contract interest rate on 30-year fixed-rate mortgages with a corresponding loan balance rose to 5.40% from 5.33% in the same period. Higher prices increase the financial pressure on residential customers who face record prices on the open market.

“The buying market has suffered from persistently low housing inventories and jumps in mortgage rates in recent months,” said Joel Kan, MBA’s deputy vice president of economic and industrial forecasting.

“These worsening reasonableness challenges have been particularly difficult for potential first-time buyers,” he added.

Lack of inventory has contributed to high house prices.
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The MBA’s purchase index, a measure of the volume of mortgage applications to buy homes, fell 7% compared to last week and was down 21% compared to the same week a year ago.

Refinancing applications also went lower, falling 6% compared to last week and as much as 75% year over year.

“Although interest rates were still lower than they were four weeks ago, they remain high enough to suppress refinancing activity. Only government refinancing saw a slight increase last week,” Kan added.

Mortgage rates have risen in recent months as the Federal Reserve begins its plan to tighten monetary policy by raising reference rates. The central bank aims to make credit more expensive in an attempt to cool the economy and curb inflation, which has peaked in four decades.

For sale sign
Mortgage rates have risen steadily in recent months.
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The average interest rate on a 30-year fixed-rate loan was 5.23% in May, up from 3.45% as late as January, according to Freddie Mac. Rising mortgage rates can lead to a fall in house prices as sellers react to the difficult environment.

Home prices across the country jumped 20.6% in March compared to the same month a year earlier, according to the latest S&P CoreLogic Case-Schiller Home Price Index released in May.

The rise was higher than it was in February, when house prices increased by 20% from year to year.