The recent increase in mortgage rates has had a direct impact on mortgage demand in the market. After a slight decline in rates during May, there was a noticeable uptick in rates last week. This rise in rates was reflected in the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances. The increase, although seemingly small at first glance, has caused a ripple effect in the industry.
Effects on Mortgage Application Volume
As a result of the increase in mortgage rates, total mortgage application volume experienced a significant drop. According to data from the Mortgage Bankers Association, mortgage application volume fell by 5.7% last week compared to the previous week. Both purchase and refinance applications decreased, leading to the overall activity in the market dropping to its lowest level since early March.
Refinance demand, which had been showing signs of recovery, plummeted by 14% for the week. Despite this decrease, refinance applications were still 12% higher than the same week one year ago. On the other hand, applications for a mortgage to purchase a home also saw a decline, falling by 1% for the week and dropping 10% compared to the same week last year.
One of the factors contributing to the decrease in mortgage demand is the limited availability of existing homes for sale. With a shortage of listings in various price ranges, potential buyers are finding it challenging to find properties that meet their needs. This scarcity, combined with the impact of rising mortgage rates, has created a challenging environment for both buyers and sellers in the housing market.
The trend of increasing mortgage rates appears to be continuing, with rates jumping sharply at the start of this week. This sudden change in rates has added another layer of uncertainty to the market, making it crucial for prospective homebuyers and homeowners looking to refinance to closely monitor the rate environment and make informed decisions based on their individual financial circumstances.