Mortgage applications fall 14% on higher rates, Hurricane Yang slams demand

A sign indicates Open House in Alhambra, California on May 4, 2022.

Frederick J. Brown | AFP | Getty Images

The highest mortgage rates in more than 20 years coincided with one of the deadliest hurricanes on record in the United States, causing mortgage demand to plummet.

Total mortgage applications fell 14.2% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, to its lowest level since 1997.

The average contractual interest rate for 30-year fixed-rate mortgages with a qualifying loan balance ($647,200 or less) increased to 6.75% from 6.52%, while the interest rate decreased to 0.95 from 1 .15 (including issuance fee) for loans with 20% down. payment.

“The current rate has more than doubled in the past year and increased by 130 basis points in the last seven weeks alone,” said MBA economist Joel Kahn.

Refinancing volume, which is most sensitive to weekly changes in interest rates, fell 18% on the week and was 86% lower than the same week a year ago. The share of refinancing mortgage activity fell to 29% of the total number of applications from 30.2% the previous week.

Mortgage applications to buy a home fell 13% in a week and are down sharply by 37% year on year.

“Last week, Florida was also affected by Hurricane Yan, which caused massive closures and evacuations. Applications in Florida fell 31% compared to 14% overall, seasonally adjusted,” Kahn added.

As higher interest rates make an already expensive housing market even more expensive, homebuyers are turning more to adjustable-rate mortgages, which offer a lower interest rate. This share of activity increased to 11.8% from 8.5% a month ago and about 3% at the beginning of this year, when mortgage rates were half what they are now.

Mortgage rates are down slightly this week, according to another Mortgage News Daily poll, but all rates are off at the end of the week when the important monthly employment report is released. Depending on how investors view the results – and how the Federal Reserve might react to those results – mortgage rates could move drastically in either direction.

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