Signage is seen at The Collection at Morristown, a housing development by Lennar Corporation, in Morristown, New Jersey, November 13, 2021.
Andrew Kelly | Reuters
Mortgage rates experienced their sixth consecutive weekly increase, resulting in a significant decline in demand for home loans, which hit a record low not seen since 1995.
According to the Mortgage Bankers Association’s seasonally adjusted index, total application volume dropped by 6.9% compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) rose to 7.70%, while points decreased to 0.71 (including the origination fee) for loans with a 20% down payment. This marks the highest rate since November 2000, surpassing the 6.94% recorded during the same week last year.
Applications for home purchase mortgages fell by 6% week-to-week and were 21% lower than the same time last year.
Refinance mortgage applications also experienced a decline of 10% for the week, resulting in a 12% decrease compared to the previous year.
“Both purchase and refinance applications declined, with conventional applications experiencing the largest drops,” stated Joel Kan, the Mortgage Bankers Association’s vice president and deputy chief economist, in a press release. He further mentioned that the adjustable-rate mortgage (ARM) share reached 9.3%, the highest level in 11 months.
Given rising interest rates and home prices, borrowers are increasingly turning to ARMs, which offer lower rates and can be fixed for up to 10 years before the rate resets, granting them greater purchasing power.
Mortgage rates continued to climb earlier this week, reaching a cyclical high of 7.92% for the 30-year fixed-rate mortgage on Tuesday, according to Mortgage News Daily. The increase was driven by an unexpectedly strong monthly retail sales report.
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