Additional Coverage:
- Mortgage demand from homebuyers drops 19% from a year ago, as interest rates surge abruptly higher (cnbc.com)
Mortgage Rates Surge Past 7%, Dampening Homebuying and Refinancing Activity
Mortgage demand continues to feel the impact of rising interest rates, as both prospective homebuyers and current homeowners pull back. According to the Mortgage Bankers Association (MBA), total mortgage application volume declined 4.1% last week compared to the prior week, even after accounting for the Labor Day holiday adjustment.
The average contract interest rate on a 30-year fixed-rate mortgage for conforming loan amounts (up to $832,750) increased to 6.97% from 6.85%, with points-including origination fees for loans with a 20% down payment-rising slightly to 0.72 from 0.67. However, by last Thursday, rates had climbed above 7%, as reported by Mortgage News Daily.
Joel Kan, MBA’s vice president and deputy chief economist, attributed the uptick to “ongoing market concerns over spiking energy prices, persistently high inflation, and future monetary policy,” which have driven bond yields and mortgage rates higher.
Refinance applications, which are particularly sensitive to interest rate changes, saw a 9% drop last week and are now 65% lower than the same week a year ago, when rates were roughly half a percentage point lower. Kan noted that “the current level of rates eliminated much of the benefit to refinance for many borrowers,” contributing to declines across conventional, FHA, and VA refinance applications.
Purchase mortgage applications also slipped, down 1% for the week and 19% compared to last year. Buyers continue to face challenges from elevated home prices, despite growing inventory in many markets-though much of the available housing tends to be in the higher price range.
Rates have kept climbing this week, with the average 30-year fixed rate reaching 7.22% on Tuesday, just ahead of the Federal Reserve’s scheduled meeting. This marks nearly a full percentage point increase compared to a year ago.
Matthew Graham, chief operating officer at Mortgage News Daily, described the recent surge as “the most abrupt jump since October 2024,” noting that “some of the volatility is due to the implications of recent economic data and oil price changes on Fed policy.”
As mortgage rates continue to rise, potential buyers and homeowners considering refinancing may face increasing hurdles in the months ahead.