Mortgage loan applications dropped 6.3% last week compared to the week before and were down 41% from the same time in 2021, according to the Mortgage Bankers Association on Wednesday. File Photo by Dan Moyle/Flickr
April 6 (UPI) — Rising interest rates continued to have a chilling effect on the home mortgage industry as the total volume of mortgage applications tumbled 6.3% last week compared to the week before, according to the latest report from the Mortgage Bankers Association on Wednesday. Total volume was down 41% from the same time in 2021.
The organization said the drop in the seasonally adjusted mortgage application index comes as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $647,200 or less increased from 4.8% to 4.9% last week.
The industry was hit even harder in the refinancing market where that index fell 10% from the previous week and 62% from the same period last year.
“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.
“The 30-year fixed mortgage rate increased for the fourth consecutive week to 4.9% and is now more than 1.5 percentage points higher than a year ago. As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019.”
Kan said that the share refinance applications made up of the entire mortgage market slipped by double-digits from a year ago — from 51% to 38.8%.
“The hot job market and rapid wage growth continue to support housing demand, despite the surge in rates and swift home-price appreciation,” Kan said. “However, insufficient for-sale inventory is restraining purchase activity.
“Additionally, the elevated average purchase loan size, and steeper 8% drop in FHA purchase applications, are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges.”
Last month, the Federal Reserve boosted interest rates for the first time since 2018 in an effort to address soaring inflation rates.