But one type of loan remains popular among first-time buyers looking for new homes
Demand for home loans contracted for the third consecutive week as the 30-year mortgage rate soared past 7%, the Mortgage Bankers Association said today.
MBA’s Weekly Mortgage Applications Survey dropped 0.8% on a seasonally adjusted basis and down 2% on an unadjusted basis. The steady decline comes as interest rates rise to new highs, with the average contract interest rate for 30-year loans increasing to 7.16% - the highest rate since 2001.
“Treasury rates were elevated again last week following mixed data on inflation and more indication of resiliency in the economy, which may pose a challenge to the Federal Reserve’s efforts to lower inflation,” said Joel Kan, deputy chief economist at MBA.
Read more: US inflation rate rises in July
Refinance and purchase applications (both down 2%) ended the week at a six-month low, driving the decline in overall application activity.
On the bright side, applications for purchase loans on newly constructed homes remained strong, up 35.5% from July 2022, as “new homes continued to account for a growing share of homes available for sale,” Kan noted.
“The FHA share of purchase applications was 24.2%, the highest share since May 2020, and has increased in four of the last five months,” Kan said in a separate MBA report. “FHA purchase loans are a popular option for many first-time homebuyers, and this increasing trend in the FHA share is indicative of more first-time buyers looking to new homes as an option, given the lack of for-sale inventory among existing homes and challenging affordability conditions.”
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