Mortgage demand dropped sharply this week, as it has been doing these last few weeks, mostly due to increasing interest rates. On the latest change in the housing market, The Portable MBA, advice wheelhouse the Mortgage Bankers Association (MBA) Overall mortgage application volume declined 12.7% from the previous week on a seasonally adjusted basis.
This most recent wave of interest rate hikes have caused a pretty dramatic drop in mortgage applications for home purchases. In other words, applications were down 7% week over week. After all, while home purchase applications have fallen recently, they remain 6% above this week last year. This suggests a remarkable willingness to dual process in the face of current market chaos.
Joel Kan, as vice president and deputy chief economist at the MBA. He’s added that economic uncertainty is making it difficult for many potential buyers to make commitments. He noted, “Similar to the previous week, economic uncertainty and rate volatility impacted prospective homebuyers.” This feeling definitely describes the consumer experience today as homeowners are trying to process this extremely volatile mortgage market.
Over the last two weeks, rates have jumped almost 30 bps. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased from 6.81% to 6.90%. This is the most substantial rate increase we’ve had over the past two months. The points on these mortgages increased to 0.66 from 0.62, adding another layer to the difficulty of borrowing.
The refinance share of mortgage activity has dropped, it still makes up a sizable chunk of total applications. The refinance share of mortgage activity decreased to 37.3% this week from 41.3% last week. That caused refinance applications to sink by 20%, though those were still 43% higher than the same week last year.
Looking ahead, recent market trends indicate a potential calm after the storm of a sharp increase in rates. The lack of additional escalation has led to some more orderly market trade. Under that scenario, rates have stayed mostly steady after Monday’s initial surge. Those headlines, focused on former President Trump’s crusade against Fed Chairman Jerome Powell, have added to recent market jitters. As Matthew Graham, chief operating officer at Mortgage News Daily explained, this may be a sign of rental unit oversupply. He stated, “Headlines regarding Trump’s comments about Fed Chair Powell rattled the market and sent rates lurching higher.”