Mortgage Demand Drops Amid Rising Rates
Prospective homebuyers are under a lot of stress as a result of the high mortgage rising rates that have been steady for a few weeks.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less), as reported by the Mortgage Bankers Association (MBA), increased last week from 6.87% to 6.93%.
Additionally, the average contract point amount for loans requiring a 20% down payment increased from 0.65 to 0.68 (including the origination fee). Compared to the 5.43% rate noted during the same time period last year, this marks a significant increase.
Additionally, since late May, mortgage interest rates have been above 6.5%. Housing affordability has suffered as a result of the rate increase, making it difficult for potential purchasers to purchase a home.
As a result, according to the MBA’s seasonally adjusted index, mortgage applications for home purchases decreased by 3% this week compared to the prior week. Surprisingly, compared to the same period last year, applications were down a stunning 26%.
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Mortgage Rates Could Reach 20-Year Highs
For the third week in a row, the purchase index continued to drop steadily, hitting its lowest point since early June.
Reduced traditional purchase application volume was a significant contributor to this decline, which was made worse by the lack of property inventory and mortgage rates that were lingering around 7% and putting pressure on prospective homebuyers’ budgets.
Applications to refinance a house loan fell by 3% over the course of the week, a significant 32% decline from the same week last year, indicating that refinancing activity was not immune to the effects of increased rates.
Given that rates are trending upward to start the week, the future for mortgage rates is still unclear. The monthly employment data will be released, which is expected to raise rates even further, according to market analysts.
Mortgage rates may hit 20-year highs by the end of the week if the positive economic forecasts come true, which bond market investors are preparing for.
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Source: www.cnbc.com
