In the past week, mortgage rates have remained relatively unchanged, mirroring the stagnant state of mortgage demand. This marks the second consecutive week with minimal movement in both categories. Potential buyers are facing obstacles in the form of soaring costs and limited housing supply. Meanwhile, existing homeowners find little motivation to refinance their properties amidst the backdrop of high interest rates.
According to data from the Mortgage Bankers Association, total mortgage application volume remained flat, experiencing a marginal 0.6% decrease from the previous week. The average contract interest rate for 30-year fixed-rate mortgages slightly decreased to 6.91%, with accompanying points dropping to 0.59. While refinancing applications dropped by 2% compared to the previous week, they were also 5% lower than the same period last year.
Applications for mortgage loans to purchase homes experienced a slight 0.1% decline from the prior week and a substantial 13% decrease compared to the same time frame a year ago. The diminished purchasing power of buyers is evident as purchase demand now stands at half of the levels recorded in March 2020. The significant drop in demand can be attributed to the spike in mortgage rates, which currently hover around 7%.
The surge in mortgage rates, which have doubled from their levels in March 2020, has had a profound impact on the housing market. Sellers are finding themselves stuck due to the diminished buyer pool, while prospective buyers are faced with decreased affordability. Notably, close to 90% of current borrowers still hold mortgages with rates below 6%, highlighting the challenge posed by the current market conditions.
Economists and industry experts have weighed in on the situation, noting that elevated mortgage rates are acting as a significant deterrent to homebuying activity. Joel Kan, an economist at the MBA, highlighted the stagnation in purchase applications, except for a slight increase in FHA purchases. The recent uptick in mortgage rates, spurred by positive economic data and inflation concerns, could potentially shift rate momentum in the near future, according to Matthew Graham, the COO of Mortgage News Daily.
The latest data on mortgage rates and demand paints a complex picture of the current housing market. With affordability challenges and supply constraints looming large, both buyers and sellers are navigating a challenging landscape, characterized by fluctuating rates and muted demand. The coming weeks will be crucial in determining the trajectory of the housing market, as economic indicators and inflation trends continue to impact mortgage rates.
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