Mortgage demand fell last week to nearly half what it was a year ago, according to the Mortgage Bankers Association, as rates hit their highest level in 21 years.
Overall, demand for mortgages is at the lowest level since 1997.
Mortgage applications to purchase a home dropped 2% from the prior week and were 42% lower than the same week in 2021. The annual comparison continues to jump each week, as fewer buyers either want or can afford to get into this very pricey housing market.
Applications to refinance a home loan fell just 0.1% for the week, but only because they were so low to begin with – down 86% from a year ago. There are currently fewer than 150,000 qualified borrowers who could benefit from a refinance at today’s rates, according to Black Knight.
Mortgage rates declined slightly to start this week, but are still well over 7% after beginning the year at around 3%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 7.16% from 6.94%, with points decreasing to 0.88 from 0.95 (including the origination fee) for loans with a 20% down payment.
Federal Housing Administration loans, which come with lower rates and smaller down payment requirements, did experience a slight uptick during the week.
“Despite higher rates and lower overall application activity, there was a slight increase in FHA purchase applications, as FHA rates remained lower than conventional loan rates,” said Joel Kan, an economist at the Mortgage Bankers Association.
The share of homebuyers applying for adjustable-rate mortgages remained high at more than four times what it was at the start of this year. ARMs offer lower rates but are considered a riskier product.
High interest rates are also weighing on home prices. While prices are still higher than they were a year ago, the gains are now slowing at a record pace. Homebuyers are also reconsidering their purchases. Pulte Group reported a 24% cancellation rate in its latest quarterly earnings report Tuesday and said it expected an even higher rate for the next quarter.