The recent increase in mortgage rates has impacted the demand for mortgages significantly. After a slight decrease during May, mortgage rates have started to rise again. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances has increased, leading to a decrease in mortgage demand. In fact, total mortgage application volume fell 5.7% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Both refinance and purchase applications have been affected by the rise in mortgage rates. Refinance demand, which was showing signs of a recovery, took a hit last week with a 14% decline. However, it is still 12% higher than the same week last year. On the other hand, applications for a mortgage to purchase a home fell by 1% for the week and were 10% lower than the same week last year. Borrowers are becoming more sensitive to even small increases in rates, impacting the refinance market and keeping purchase applications below last year’s levels.
One of the challenges that buyers are facing is the limited levels of existing homes for sale. Many potential buyers are struggling to find listings within their price range that meet their requirements. This scarcity of available homes is further exacerbating the impact of rising mortgage rates on the demand for mortgages. The combination of high rates and low inventory is creating a challenging environment for homebuyers.
To add to the pressure on potential borrowers, mortgage rates have been climbing rapidly. Rates jumped by 12 basis points in just one day, according to a survey from Mortgage News Daily. This continuous increase in rates is likely to further dampen mortgage demand in the coming weeks. Borrowers need to be prepared for higher rates and their impact on affordability before making decisions regarding mortgages.
The rise in mortgage rates has had a direct and immediate impact on mortgage demand. Both refinancing and home purchase applications have declined, with borrowers showing sensitivity to even small increases in rates. The challenges posed by limited housing inventory are further complicating the situation for buyers. With rates continuing to rise, borrowers need to carefully consider their options and be prepared for a more expensive mortgage market.