Mortgage demand falls to lowest level in three months

Mortgage rates soared last week as stronger economic data sparked more fears that the Federal Reserve might not cut interest rates anytime soon. In turn, demand for mortgages fell to its lowest level since late February.

The average contractual interest rate for 30-year fixed rate mortgages with conforming loan balances ($726,200 or less) fell from 6.69% to 6.91%, with points rising from 0, 66 to 0.83 (including origination fees) for loans with a 20% decline. payment. That was the weekly average according to the Mortgage Bankers Association, but other daily readings saw the rate top 7%.

As a result, home loan applications to refinance a home loan, which are the most sensitive to rate changes, fell 7% last week compared to the previous week, seasonally adjusted. The volume of requests was 45% lower than the same week a year ago.

Mortgage applications to buy a home fell 3% for the week and were 31% lower than in the same week a year ago.

“Purchase and refinance loan application volumes declined last week due to these higher rates,” Michael Fratantoni, the MBA’s chief economist, said in a statement. “While the demand for refinancing is almost entirely determined by the level of rates, the volume of purchases continues to be limited by the lack of housing on the market.”

With home prices beginning to recover, mortgage rates higher and inventory levels still well below normal, potential buyers are being hit on all sides by affordability. The higher the rates, the less likely current owners will be to put their home up for sale. The vast majority of homeowners today have mortgages with interest rates below 5%.

The direction of mortgage rates depends primarily on new readings on the economy. The next will be on Friday, with the release of the government’s monthly employment report.