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Surging interest rates push mortgage

demand down more than 40% from a
year ago
Diana Olick
@ I N / D I A N AO L I C K
@ D I A N AO L I C KC N B C
@ D I A N AO L I C K

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KEY The average contract interest rate for 30-year fixed-rate mortgages with conforming
POINTS loan balances ($647,200 or less) increased to 4.90% from 4.80% for loans with a UP NEXT | ET Listen
20% down payment.

Applications to refinance a home loan, which have been falling steadily for months,
dropped another 10% week to week.

Mortgage applications to purchase a home fell 3% for the week and were 9% lower
than the same week one year ago.

Saul Loeb | AFP | Getty Images

Rising interest rates are crushing the mortgage market, as precious few
homeowners can now benefit from a refinance and more potential homebuyers
become priced out.

Total mortgage application volume fell another 6% last week compared with
the previous week, according to the Mortgage Bankers Association's seasonally
adjusted index. Volume was down 41% from 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 4.90% from 4.80%,
with points decreasing to 0.53 from 0.56 (including the origination fee) for
loans with a 20% down payment. That rate was just 3.36% one year ago. That
is the fourth consecutive week of increases.

Applications to refinance a home loan, which have been falling steadily for
months, dropped another 10% week to week. Refinance demand was 62%
lower than the same week one year ago.

"Mortgage application volume continues to decline due to rapidly rising

mortgage rates, as financial markets expect significantly tighter monetary
policy in the coming months," said Joel Kan, an MBA economist. "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 fell to 38.8% from 51% a year ago.

Mortgage applications to purchase a home declined 3% for the week and were
9% lower than the same week one year ago. A strong employment market with
continuing wage growth is keeping housing demand hot, but the supply of
existing homes for sale is still extremely lean. Bidding wars tend to be the rule,
rather than the exception. Affordability is falling fast, and entry-level buyers
are being sidelined.

"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," added
Kan.

The drop in mortgage business is causing layoffs at companies like Movement

Mortgage and Better.com. Mortgage companies had been on massive hiring
sprees in the first year of the Covid pandemic, as interest rates set more than a
dozen record lows and both refinance and purchase demand surged.

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