Climbing Interest Rates Damage Mortgage Demand, Loan Applications Down 40%

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Rapidly rising interest rates and tighter monetary policy are continuing to push mortgage applications down. For the week ending April 1, they decreased 6.3% according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Total volume is down 41% versus the same week in 2021, per CNBC.

“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” Joel Kan, MBA’s associate VP of economic and industry forecasting, said in a press release.

In addition, the Refinance Index decreased 10% from the previous week and was 62% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 3% compared with the previous week, and was 9% lower than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances — $647,200 or less — increased to 4.9% from 4.8%, while the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances — greater than $647,200 — increased to 4.51% from 4.4%, according to the survey.

“The 30-year fixed mortgage rate increased for the fourth consecutive week to 4.90% and is now more than 1.5 percentage points higher than a year ago,” Kan said in the release. “As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019. The refinance share of all applications dipped to 38.8%, down from 51% a year ago.”

Kan added that the hot job market and rapid wage growth continue to support housing demand, despite the surge in rates and swift home-price appreciation.

“However, insufficient for-sale inventory is restraining purchase activity. Additionally, the elevated average purchase loan size, and steeper 8% drop in FHA purchase applications, are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges,” he said.

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