Rising mortgage rates deter homebuyers
Mortgage applications took a hit last week as long-term mortgage rates rose for the third consecutive week, reaching their highest levels since late 2023.
The Market Composite Index, a measure of mortgage loan application volume, fell 2.7% on a seasonally adjusted basis from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.
This drop comes as the average contract interest rate for the 30-year fixed mortgage climbed to a five-month high.
“Mortgage rates continued to move higher last week, reaching their highest levels since late 2023 and putting a damper on applications activity,” MBA chief economist Joel Kan said in a news release emailed to MPA. “The 30-year fixed rate increased for the third consecutive week to 7.24%, the highest since November 2023.”
The refinance index dropped 6% from the previous week, although it was still 3% higher than the same week last year. Meanwhile, the seasonally adjusted purchase index declined 1% from the previous week, while unadjusted purchase applications experienced a slight increase of 0.2% yet were 15% lower than the same week a year ago.
Kan noted that the rise in rates contributed to a decline in purchase applications, with potential homebuyers pausing their decisions due to worsened affordability and low housing supply.
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“The ARM share of applications increased to 7.6%, consistent with the upward trend in rates, as buyers look to reduce their potential monthly payments,” he said.
MBA’s data also showed that the FHA share of total applications increased to 12.8% from 12.3% week over week, while the VA share decreased to 11.7% from 12.4%. The USDA share remained unchanged at 0.4%.
The refinance share of mortgage activity decreased to 30.8% of total applications from 32.1% the previous week.
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