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Rising interest rates are crushing the mortgage market as some homeowners who are precious can now benefit from refinancing and more likely homebuyers to pay the price.
According to the Seasonal Adjusted Index of the Mortgage Bankers Association, the total mortgage application volume fell further by 6% last week compared to the previous week. Volume is down 41% from the same week a year ago.
The average contract interest rate for 30-year fixed-rate mortgages increased from 4.80% to 4.90% ($ 647,200 or less). A year ago that rate was just 3.36%. This is the fourth consecutive week of hikes.
Applications for home loan refinancing have been declining by 10% week by week as they continue to decline over the months. Refinancing demand was 62% lower than the same week a year ago.
“The mortgage application volume continues to decline due to rapidly rising mortgage rates as financial markets expect a significantly tighter monetary policy in the coming months,” said Joel Conn, an MBA economist. “Application volume has fallen to its lowest level since spring 2019 as higher rates reduce the incentive for refinancing.”
The refinancing share of all applications fell to 38.8% from 51% a year ago.
Mortgage applications for buying a home were down 3% weekly, down 9% from the same week a year ago. A strong employment market with continued wage growth keeps housing demand hot, but the supply of homes for sale is still very slim. Auction wars are the rule, without exception. Affordable prices are falling fast, and entry-level buyers are being sidelined.
“The high average purchase credit volume, and the 8% decline in FHA purchase applications both indicate that first-time buyers are proportionately affected by supply and affordability challenges,” Khan said.
The collapse of the mortgage business has led to layoffs at companies such as Movement Mortgage and Better.com. Mortgage companies were heavily hired in the first year Govt epidemicBoth refinancing and purchasing demand increased as interest rates set more than a dozen record lows.