NEW YORK (Washington Insider Magazine) – As increased interest rates and inflationary pressures hit American consumers hard, the turmoil in the mortgage industry is just growing worse.
According to the seasonally adjusted index from the Mortgage Bankers Association, mortgage demand dropped by more than 6 percent last week compared to the week before, reaching its lowest point since 2000.
Mortgage applications to buy a home fell 7 percent for the week and were 19 percent lower than they were during the same week in 2021. Although buyers have had to deal with high costs all year, they have far less purchasing power now that rates are nearly double what they were in January.
Government and conventional loan purchase activity decreased as a result of the worse economic prospects, rising inflation, and ongoing affordability issues, according to Joel Kan, an economist with the MBA.
Although weekly changes in interest rates have less of an impact on purchasers, the overall trend of increasing rates has already had a negative impact. Following a small decline over the previous three weeks, mortgage rates increased once more last week, according to NBC NEWS.
For loans with a 20% down payment, the average contract interest rate for thirty-year fixed-rate mortgages with conforming loan amounts ($647,200 or less) jumped to 5.82 percent from 5.74 percent, while the points (including origination fees) increased to 0.65 from 0.59. In the same week a year earlier, that rate was 3.11 percent.
Refinance demand, which is very rate sensitive, dropped 4% for the week and was 80% lower than the same week in 2016. Even though the number of applications is at a 22-year low, the refinancing portion of mortgage activity increased from 30.8 percent the previous week to 31.4 percent this week due to the decline in demand from homebuyers.
This week, mortgage interest rates haven’t changed significantly, but with the rising volatility of the bond market, that may soon change. The Federal Reserve is anticipated to raise interest rates by an additional 75 basis points the following week, and other central banks are also combating inflation in a similar manner. A basis point is equivalent to 0.1%.