Mortgage demand continues to fall as interest rates soar to June high

GP: Sale of houses

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In June, the average rate on 30-year fixed bonds briefly jumped more than 6%, enough to turn the once hot housing market back on track. Rates dropped in July and August, but the damage had already been done. Rates are now back above 6%, pushing already beleaguered mortgage demand even further.

The average contractual interest rate for 30-year fixed-rate mortgages with a matching loan balance ($647,200 or less) increased to 5.94% last week from 5.80% the previous week, according to the Mortgage Bankers Association. for loans with 20% down payment. . This was a weekly average, but there were several days when the rate was over 6% in another Mortgage News Daily poll.

“Mortgage rates have risen over the past week as markets continued to reassess the outlook for the economy and the stance of monetary policy, expecting short-term rates to change and stay higher for a longer time,” Mike Fratantoni said. Senior Vice President MBA and Chief Economist.

As a result, mortgage applications to refinance a home loan fell another 1% on the week and were 83% lower than in the same week a year ago. Mortgage rates were just under 3% a year ago and have been at record lows for most of 2021, so there are very few people now who haven’t yet refinanced a loan at a much lower rate than they do today.

Mortgage applications to buy a home fell 1% in a week and were 23% lower than the same week a year ago. Given today’s higher rates, a person buying a $400,000 house would pay nearly $700 more per month than they did a year ago.

“Recent economic data is likely to prevent a significant decline in mortgage rates in the near future, but the strong labor market reflected in the August data should support housing demand,” Fratantoni said, adding: “There are no signs of a recovery in the number of applications for purchase. yet, but a robust labor market and increased housing stocks should lead to a possible increase in buying activity.”

Mortgage rates jumped even higher earlier this week as investors look to Federal Reserve members for more information on how big the next rate hike could be. Higher mortgage rates are already cooling home prices, but given how much they have risen over the past few years, significantly more cooling is likely to be needed before affordability is fully restored.

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