Interest rates rise, leading to a decrease in mortgage demand for third consecutive week

Mortgage rates have remained stubbornly high for several weeks, significantly impacting potential homebuyers.

According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or lower) increased to 6.93% from 6.87% last week. Additionally, points rose to 0.68 from 0.65 (including the origination fee) for loans with a 20% down payment. Comparatively, rates were at 5.43% during the same period last year. Since the end of May, rates have consistently remained above 6.5%.

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These higher rates have had a significant impact on housing affordability, and potential homebuyers are clearly facing challenges. According to the MBA’s seasonally adjusted index, mortgage applications for home purchases dropped by 3% compared to the previous week. Furthermore, applications were 26% lower compared to the same week last year.

Joel Kan, an MBA economist, noted, “The purchase index decreased for the third straight week to its lowest level since the beginning of June. The decline in purchase activity was primarily driven by weaker conventional purchase application volume due to limited housing inventory and rates that are still close to 7%, making it difficult for many potential homebuyers to afford a home.”

Refinance applications also experienced a decline of 3% for the week and were 32% lower compared to the same period last year.

Mortgage rates started the week on an upward trend and may continue to rise in anticipation of the upcoming monthly employment report, scheduled for release on Friday.

Matthew Graham, chief operating officer at Mortgage News Daily, explained, “The bond market is clearly preparing for positive economic data. If these predictions come true, rates could reach their highest point in 20 years by the end of this week.”