Mortgage demand from homebuyers is down 29% from last year, while interest rates soar above 6%

Demand for mortgages looks to be going nowhere as interest rates rise.

The Mortgage Bankers Association’s seasonally adjusted index showed that the number of applications last week fell 1.2% from the previous week. Weekly results include adjustments for Labor Day observance. Since last year, homebuyer demand for mortgages has dropped by nearly a third.

In July, after Federal Reserve Chairman Jerome Powell told investors the central bank would remain tough on inflation, even if it caused some pain to consumers. Mortgage rates eased slightly from August to August, but rose again.

The average contractual interest rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) rose from 5.94% to 6.01%, and the points decreased from 0.79 (including origination fees) to 0.76. payment.

“30-year fixed mortgage rates hit the 6% mark for the first time since 2008, rising to 6.01%, effectively double what they were a year ago,” said MBA Associate Vice President of Economics and Industry Forecasts. President Joel Kan said. .

Refinancing demand fell another 4% this week, down 83% from the same week a year ago. According to Black Knight, a mortgage technology and data provider, only about 452,000 borrowers can benefit from refinancing when interest rates rise above his 6%. This is the lowest number in history. These remaining few candidates only saved about $315 per month per borrower.

Mortgage applications to buy a home were down 0.2% from the previous week, but down 29% from the same week a year ago. Demand for Veterans Affairs and USDA loans soared. These loans are preferred by first-time buyers due to their low or no down payment.

“Spreads between the compliant 30-year fixed mortgage rate and both ARM and jumbo loans remained wide last week, at 118 and 45 basis points respectively. It highlights capital market volatility due to uncertainty,” Kang added.

Mortgage rates rose significantly this week after monthly inflation beat expectations. Investors were therefore worried that the Federal Reserve would raise rates more than expected at its next meeting.

“One of the last shoes to drop before the September 21st Federal Reserve announcement, arriving just as the market fully priced in the 75bp hike, if the data is compelling. Matthew Graham, chief operating officer of the Mortgage News Daily, wrote: “This is at least enough for the Fed to start a conversation. He had the power of persuasion.

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