Mortgage Demand Drops Sharply as Rates Surge Higher

Rising interest rates are once again cooling demand in the housing market, with total mortgage application volume plummeting 10.8% last week, according to the Mortgage Bankers Association’s (MBA) seasonally adjusted index.

Rate Surge Dampens Activity

The average interest rate for a 30-year fixed-rate mortgage with conforming loan balances ($766,650 or less) climbed to 6.81%, up from 6.73% the previous week. Despite this increase, points for loans with a 20% down payment decreased slightly, moving from 0.69 to 0.68, including origination fees.

Refinance and Purchase Applications Decline

Refinance demand, highly sensitive to rate changes, fell sharply by 19% for the week. However, refinance applications were still 48% higher than the same week last year, when rates were 80 basis points higher.

Applications for home purchase mortgages also took a hit, dropping 5% for the week, though they were up 2% year-over-year. The recent gains in homebuying activity, driven by easing home prices and increased inventory, have been tempered by rising rates, which are pricing some potential buyers out of the market.

Market Uncertainty Persists

While the housing market has shown signs of resilience in recent months, the latest surge in mortgage rates, combined with economic uncertainty and concerns surrounding the upcoming election, may leave more buyers hesitant to commit.