The Mortgage Bankers Association (MBA) has reported a 4.6% decline in the number of applicants for mortgage loans last week, attributing the decrease to the rebound in mortgage interest rates.
Specifically, the number of individuals applying for refinance loans witnessed a 5% drop in the past week, plummeting by 44% year-over-year. Similarly, the number of applicants for home loans experienced a 4% decrease, marking a 30% decline compared to the same period last year.
This decline in mortgage applications coincides with a notable increase in average interest rates for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less. Last week, the average interest rate surged to 6.69%, compared to 5.46% in the previous week.
According to the MBA, the average mortgage interest rate in the United States has surpassed 7%, reaching its highest level since March. Yesterday, the average interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less rose to 7.01% after reaching 6.95% on Monday.
The continuous rise in average mortgage interest rates is largely influenced by the adjustment tied to the 10-year US government bond yield, which serves as the reference rate for mortgage lending rates. The Federal Reserve officials (Fed) have expressed support for increasing interest rates as a measure to curb inflation.
Furthermore, uncertainty surrounding negotiations to raise the US debt ceiling has contributed to the rate hike. Despite the recent agreement reached between the White House and Congress to expand the debt ceiling, it is unlikely to lead to a significant drop in interest rates.
The combination of rising mortgage rates and economic uncertainties has prompted a decrease in the number of individuals applying for mortgage loans. As prospective homeowners and refinancers assess the impact of higher interest rates on their borrowing costs, the housing market may experience a slowdown in activity.
Market participants will continue to monitor interest rate trends and assess the potential implications for the housing sector. The ongoing focus on curbing inflation and navigating fiscal challenges will shape the direction of mortgage interest rates in the coming months.