Mortgage rates hit their highest level since late May last week, which in turn weighed on demand for mortgages.
The total volume of mortgage applications fell 4.4% last week compared to the previous one, according to the Mortgage Bankers Associationseasonally adjusted index of . Demand is now at its lowest level in a month.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.85% from 6.75%, with points rising to 0.65 from 0.64 (including origination fee) for loans with 20% down payment.
While that was the average rate for the week, a separate Mortgage News Daily survey showed the rate topped 7% last Thursday. It has remained above that mark ever since, rising to 7.08% on Tuesday of this week.
As a result, the demand for mortgages to buy a home, which had been rising for three consecutive weeks, fell 5% on the week and was 22% lower than the same week a year ago.
“Rates are still more than a percentage point higher than a year ago, and housing affordability remains a challenge in many parts of the country,” Joel Kan, MBA deputy chief economist, wrote in a statement. “However, the average loan size for a purchase request decreased to $423,500, its lowest level since January 2023.”
The drop in loan size, according to Kan, was probably driven by a decline in home buying in some high price markets and more activity at some of the lower price levels.
Applications to refinance a home loan fell 4% on the week and were 30% lower than the same week a year ago. As the summer progresses, the year-on-year comparison is likely to narrow, as it did last summer when mortgage rates shot significantly higher for the first time since. the covid pandemicand, consequently, the demand for refinancing plummeted.
While the 30-year fixed has held above 7% for the past week, it could be affected by jobs data due on Thursday and Friday. That could influence the Fed’s next moves, which are likely to include new rate hikes.
