Mortgage rates are back on the upswing, after a brief decline in May, and the housing market is still suffering from a lack of listings. As a result, mortgage demand continues to drop.
Total mortgage application volume fell 6.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand hit the lowest level in 22 years.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.40% from 5.33%, with points rising to 0.60 from 0.51 (including the origination fee) for loans with a 20% down payment.
Refinance demand, which is most sensitive to weekly rate moves, fell another 6% for the week and was 75% lower than the same week one year ago. The vast majority of mortgage holders now have rates considerably lower than the current one, and even those who would like to pull cash out of their homes are choosing second mortgages, rather than refinancing their first liens.
“While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week,” said Joel Kan, an MBA economist.
Applications for a mortgage to purchase a home fell 7% for the week and were 21% lower than the same week one year ago.
“The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months. These worsening affordability challenges have been particularly hard on prospective first-time buyers,” Kan said.
Mortgage rates moved even higher to start this week, according to a separate survey by Mortgage News Daily. Rates have been in a narrow range for several weeks after moving decidedly higher in the previous months.
“There’s some chance that the upper boundaries of that range end up being a ceiling for rates, but that will depend on inflation and other incoming economic data,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “With a key inflation report set to release on Friday morning, the potential for volatility remains high.”