Mortgage Application Rate Down 11%

The housing market is slowing down, and mortgage rates have something to do with it. The MBA’s seasonally adjusted index showing total volume for Monday-Friday last week fell 11%. This may not seem like a big deal but when you consider how much easier refinancing or buying another house would be if those numbers weren’t dropping by such large margins each month, then things start looking pretty bad.

Homebuyer demand declined 12% week to week and 15%, respectively, compared with the same period one year ago. This is the first weekly drop in homebuyer interest since early April when mortgage rates increased by over two percentage points as well as housing prices climbing more than 20%.

The interest rates on mortgages have been decreasing recently, and the average contract for a 30-year fixed rate with conforming loan balances is at an all-time low. For those who put down 20%, there are now fewer interest points than before.

The current state of inflation has not only taken its toll on household finances but also on how consumers feel about purchasing a home. “General uncertainty about the near-term economic outlook, as well as recent stock market volatility may be causing some households to delay their search for property,” said Joel Kan an MBA economist from University College London.

Refinancing has been a hot topic for homeowners this year, with the demand rates on mortgages throughout America declining 10% from last week. The reasons why people are choosing to refinance their home loans range anywhere between lower interest rates and safety fears following the Covid pandemic.

The adjustable-rate mortgage share of total applications has been on a steady rise, this year reaching 10.5%. Rates are around 3% at the mortgage term start, ARMs offer lower interest rates that can be fixed for up to ten years.

The National Association of Home Builders reported that builder sentiment dropped to its lowest level in nearly two years. This is a clear indicator that demand for homebuyers may be slowing down, which could lead us back into another housing bubble.

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