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Mortgage demand falls to lowest level since 2019, even as interest rates fall

A single-family home is listed for sale in Encinitas, California.

Mike Blake | Reuters

Demand for mortgages fell to its lowest level since December 2018, even after the slight drop in rates last week.

Mortgage applications to buy a home fell 1% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 14% lower than the same week a year ago.

Despite a slight decline, mortgage rates are significantly higher than they were at the start of this year.

Indeed, the average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.33% from 5.46%, with points rising from 0.60 to 0.51 (including origination fees) for loans with a rate of 20%. advance payment.

“Mortgage rates fell for the fourth time in five weeks as fears of weaker economic growth and the recent stock market selloff pushed Treasury yields lower,” said MBA economist Joel Kan.

Rising interest rates and sharp increases in house prices are having a major impact on affordability. Prices continue to rise because there is still so little supply in the market, but different levels of buyers see different pictures.

“Demand is high at the high end of the market, and supply and affordability issues are not as detrimental to these borrowers as they are to first-time buyers,” Kan said.

The average contractual interest rate for 30-year fixed rate mortgages with giant loan balances (greater than $647,200) decreased from 5.02% to 4.93%. Jumbo loans are mostly held in portfolios of investors and banks, instead of being sold to Fannie Mae or Freddie Mac. Lenders view them as less risky given the higher credit quality of the borrower they typically go to.

Requests to refinance a home loan, which are more sensitive to rate movements than purchase requests, fell 5% on the week and were 75% lower than the same week a year ago. Even though rates have come off their highs in recent weeks, refinance demand has not returned as many borrowers have already gone through the process when rates were at record highs last year.

Mortgage rates started rising this week, according to a Mortgage News Daily reading, due to volatility in global markets

“High inflation in Europe and the easing of Covid-related lockdowns in China have both weighed on bonds,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.

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