Mortgage Applications Drop 10% As Interest Rates Continue to Rise
The average contract interest rate for 30-year fixed-rate mortgages increased to 3.83% from 3.78% at the start of February, causing a 10% decline in mortgage applications to purchase a home on a weekly basis, CNBC reports. Rates have been steadily rising since the start of the year, but buyers who initially seemed unfazed are now pulling back, especially as dwindling housing supply pushes home prices higher.
Year-over-year inventory for the month of January dropped 28% nationally, and new listings were also down 9% after the second straight month of declines. In a typically subdued season for home buying, January saw a record fast pace of home sales, indicating another heated market ahead in 2022.
“Mortgage rates followed the U.S. 10-year yield and other sovereign bonds as the Federal Reserve and other key global central banks responded to growing inflationary pressures and signaled that they will start to remove accommodative policies,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
As a result, applications to refinance a home loan fell 7% for the week and were 52% lower than the same week one year ago. The refinance share of mortgage activity decreased to 56.2% of total applications from 57.3% the previous week. There is a shrinking population of borrowers who can benefit from a refinance now, about half as many as there were one year ago.