With interest rates on new 30-year mortgages flirting with 6%, mortgage applications overall dropped 3.7% for the week and volume was 63% lower than the same week one year ago, falling to “multi-decade lows,” the Mortgage Bankers Association reported Wednesday.
Home refinancings—most sensitive to rate increases--have tumbled even harder, falling by 8% for the week to make up just 30.3% of total applications—an 83% decline since one year ago, MBA reported in its Market Composite Index, a measure of mortgage loan application volume.
Mortgage demand was impacted by a sharp uptick in interest rates. “Application volume dropped and remained at a multi-decade low last week,” Joel Kan, MBA's associate vice president of economic and industry forecasting said in a statement.
The main impetus for rising rates was Federal Reserve Chairman Jerome Powell’s announcement that the Fed planned to continue tightening and rate hikes to combat inflation.
"Mortgage rates and Treasury yields rose last week as Federal Reserve officials indicated that short-term rates would stay higher for longer. Mortgage rates have been volatile over the past month, bouncing between 5.4% and 5.8%," Kan added.
In another sign that market volatility has picked up, the average rate on a jumbo loan was 5.32%, 48 basis points lower than for a conforming loan. This spread reached a high of over 50 basis points in July – and had narrowed – before now widening again.
MBA’s Purchase Index — which measures mortgage applications for the purchase of a home — fell by 1.8% from the previous week.
"Purchase applications have declined in eight of the last nine weeks, as demand continues to shrink due to higher rates and a weaker economic outlook," Kan noted.
"However, rising inventories and slower home-price growth could potentially bring some buyers back into the market later this year," he added.
A new Realtor.com survey found that sellers are offering more concessions to lure buyers into signing contracts.