Real estate sales associates Ryan Ratliff (left), Ryan Paredes (r) and Ariadna Paredes of Re/Max Advance Realty show a home for sale in Cutler Bay, Florida on April 20, 2023.
Joe Raddle | Getty Images News | getty images
Mortgage interest rates have reached levels not seen since 2000. As a result, mortgage demand is now near a 27-year low.
Total mortgage application volume declined 1.3% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was down 25.5% compared to the same week a year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased from 7.31% to 7.41%, points for loans with conforming loan balances at 20% decreased from 0.72 (including origination fee) to 0.71 . advanced payment. A year ago this rate was 6.52%.
The 30-year fixed jumbo mortgage rate increased to 7.34%, the highest rate in the history of MBA’s jumbo rate series since 2011.
“Based on the FOMC’s recent projections, rates are expected to remain high for a longer period of time, leading to a rise in Treasury yields,” MBA economist Joel Kahn said, citing the Federal Open Market Committee. “Overall applications have declined, as both potential homebuyers and homeowners are feeling the impact of these higher rates.”
Applications to refinance home loans declined 1% during the week and were down 21% from a year ago. After record low interest rates and a surge in refinancing in the first few years of the pandemic, there are now very few borrowers whose mortgage rates are high enough to benefit from refinancing.
Applications for mortgages to purchase homes declined 2% for the week and were down 27% compared to the same week year over year.
Today’s potential buyers are faced with the unprecedented dynamics of a historically low supply of homes for sale coupled with both rising interest rates and rising prices. High interest rates have historically poured cold water on home prices, but the imbalance of supply and demand is so severe that it is pushing prices higher even as more buyers are unable to afford a home.
According to a separate survey from Mortgage News Daily, interest rates continued to rise this week. Sales of newly constructed homes, which had been rising due to low supply in the resale market, also took a hit in August, according to another report this week. Sales in August slowed nearly 9% from July’s pace, reaching the lowest level since March.