A sign announces an open house in Alhambra, California, May 4, 2022.
Frederic J. Brown | AFP | Getty Images
The highest mortgage rates in more than 20 years coincided with one of the deadliest hurricanes in the United States, both of which contributed to a sharp decline in mortgage demand.
Total mortgage applications fell 14.2% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, the lowest since 1997.
The average contract rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) increased from 6.52% to 6.75%, with points going from 1.15 (including the setup fee) to 0.95 for loans with a Discount of 20% decreased payment.
“The current interest rate has more than doubled over the past year and is up 130 basis points in the last seven weeks alone,” noted Joel Kan, an MBA economist.
Funding volume, which is most sensitive to weekly interest rate movements, fell 18% this week and was 86% lower than the same week a year ago. The refinancing share of mortgage activity fell to 29% of all applications from 30.2% in the previous week.
Mortgage applications to buy a home fell 13% on the week and were 37% lower year-on-year.
“There was also an impact from Hurricane Ian’s arrival in Florida last week, leading to widespread closures and evacuations. Florida applications fell 31% compared to 14% overall on a non-seasonally adjusted basis,” Kan added.
With higher interest rates making an already expensive housing market even more expensive, homebuyers have turned to more adjustable rate mortgages, which offer a lower interest rate. That share of activity rose to 11.8%, up from 8.5% a month ago and around 3% earlier this year, when mortgage rates were less than half what they are now.
Mortgage rates are down slightly this week, according to another Mortgage News Daily poll, but all bets are off at the end of the week when the all-important monthly jobs report is released. Depending on how investors view the results — and how the Federal Reserve might react to those results — mortgage rates could move significantly either way.