Demand for Mortgages Hits Lowest Level Since 2000


Decline in purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages, according to the Mortgage Bankers Association.

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Mortgage applications declined for the third week in a row last week, hitting the lowest level in more than 20 years as rates on 30-year fixed-rate conventional mortgages climbed closer to 6 percent, according to a survey issued Wednesday by the Mortgage Bankers Association.

The MBA’s Weekly Applications Survey showed demand for mortgages hit a 22-year low during the week ending July 15, with requests for purchase loans and refinancing both down by double digits from a year ago.

After adjusting for seasonal factors, requests for purchase loans were down 7 percent from the week before, and 19 percent from a year ago. Requests to refinance were down 4 percent week over week and 80 percent from a year ago.

Joel Kan

With most mortgage rates more than two percentage points higher than a year ago, “demand for refinances continues to plummet, with MBA’s refinance index also falling to a 22-year low,” MBA forecaster Joel Kan said in a statement. “Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand. The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs.”

The MBA Market Composite Index, a measure of total mortgage loan application volume, was down by a seasonally adJusted 6.3 percent from the week before, to the lowest level since 2000 in records dating to 1990.

The survey, which has been conducted since 1990, showed that requests for FHA loans accounted for 12.4 percent of all applications, up from 11.7 percent the week before. But VA loans applications accounted for 10.6 percent of total requests, down from 11.2 percent the week before.

Mortgage rates edging up again

Mortgage rates have been on the rise this year as the Federal Reserve tightens monetary policy to fight inflation. After hitting a 2022 peak of 6.06 percent on June 14, rates eased to around 5.6 percent on July 5, according to the Optimal Blue Mortgage Market Indices. But rates have edged back up since then, with rates on 30-year fixed-rate conforming mortgages once again approaching 6 percent.

The Fed has raised the federal funds rate three times since March 17 by a total of 1.5 percentage points, with half of that increase implemented in June when Fed policymakers ordered the largest bump in 28 years.

Bond market investors will be looking for clues as to whether the Fed will continue to pursue its aggressive efforts to fight inflation at its next meeting, which concludes July 27. Minutes of the committee’s June meeting suggest that policymakers are ready to take an even more aggressive stance if inflation continues to defy their attempts to cool it.

The CME FedWatch Tool, which monitors futures contracts to calculate the probability of Fed rate hikes, shows most bond traders expect the Fed will implement another 75 basis-point rate hike on July 27. But futures contracts have priced in a 36 percent chance the Fed will raise short-term rates by 100 basis points — a full percentage point.

During the week ending July 15, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances of $647,200 or less) rates averaged 5.82 percent, up from 5.74 percent the week before. With points increasing to 0.65 from 0.59 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also increased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 5.31 percent, up from 5.25 percent the week before. With points unchanged at 0.38 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 5.50 percent, up from 5.49 percent the week before. But with points points decreasing to 1.02 from 1.08 (including the origination fee) for 80 percent LTV loans, the effective rate decreased.
  • Rates for 15-year fixed-rate mortgages popular with homeowners who are refinancing averaged 4.88 percent, down from 4.93 percent the week before. With points decreasing to 0.76 from 0.72 (including the origination fee) for 80 percent LTV loans, the effective rate also increased decreased.
  • For 5/1 adjustable-rate mortgages (ARMs), rates averaged 4.60, down from 4.71 percent the week before. Although points increased to 0.96 from 0.77 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.

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