Mortgage demand falls as 30-year rates climb to 6.8% amid higher borrowing costs
Mortgage applications dropped nearly 3% week-over-week as the average 30-year fixed rate rose to 6.81%, the highest level in more than a year, according to the Mortgage Bankers Association.
The Mortgage Bankers Association reported a 2.9% decline in total mortgage applications last week, with volumes also 5% lower than the same period a year earlier – the first annual drop since April. The average contract rate for a 30-year fixed-rate mortgage on conforming loans up to $832,750 rose to 6.81% from 6.76%, while points fell to 0.65 from 0.69 for borrowers putting down 20%.
"In the wake of the July FOMC meeting, longer-term rates increased, with mortgage rates reaching their highest level in more than a year," said Mike Fratantoni, chief economist at the Mortgage Bankers Association. "Application volume for both refinance and purchase loans declined for the week, and are now running behind last year's pace, indicating that higher mortgage rates have weakened overall demand."
Refinance applications slipped 2% for the week and were 9% lower than a year ago, reflecting fewer homeowners able to secure a rate cut of at least 0.75 percentage point. Purchase-loan applications fell 4% week-over-week and 3% compared with the prior year, as higher borrowing costs offset any price concessions in a market where home prices remain elevated.
A separate Mortgage News Daily survey noted a modest decline in rates early this week, attributing the movement to reduced oil prices following a de-escalation in Iran-related tensions. Matthew Graham, chief operating officer at Mortgage News Daily, wrote that the bond market gains provided lenders with confidence to adjust rates, bringing the average 30-year fixed rate down to its lowest level in just over two weeks.