A sign indicates an open house in Alhambra, California on May 4, 2022.
Frederic J. Brown | AFP | Getty Images
The highest mortgage rates in more than 20 years coincided with one of the deadliest hurricanes on record in the United States, both contributing to a sharp drop in demand for mortgages.
Total mortgage application volume fell 14.2% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, to the lowest level since 1997.
The average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell from 6.52% to 6.75%, with points rising from 1.15 at 0.95 (including origination fees) for loans with a 20% decline. Payment.
“The current rate has more than doubled over the past year and is up 130 basis points in the past seven weeks alone,” noted MBA economist Joel Kan.
Refinancing volume, which is most sensitive to weekly movements in interest rates, fell 18% for the week and was 86% lower than the same week a year ago. The refinancing share of mortgage activity fell to 29% of total applications from 30.2% the previous week.
Mortgage applications for buying a home fell 13% for the week and fell 37% year-on-year.
“There was also an impact from the arrival of Hurricane Ian in Florida last week, which caused widespread closures and evacuations. Applications in Florida fell 31%, compared to 14% overall, on an unadjusted basis,” Kan added.
With higher interest rates making an already expensive housing market even more expensive, buyers have turned more to variable rate mortgages, which offer a lower interest rate. That share of activity fell to 11.8% from 8.5% a month ago and around 3% at the start of this year, when mortgage rates were less than half of what they are now.
Mortgage rates have fallen slightly this week, according to another Mortgage News Daily survey, but all bets are off at the end of the week when the all-important monthly jobs report comes out. Depending on how investors perceive the results — and how the Federal Reserve might react to those results — mortgage rates could move decisively in either direction.