Applications for purchase mortgages dropped -7% w/w and -21% y/y.
Mortgage Rates on Upswing
The average contract interest rate for a 30-year fixed-rate mortgage increased to 5.40% for the week of June 1 from 5.33% the week prior. (The rate of 5.40% was the premise for this writing.)
The result of this coupling of the week’s mortgage interest rate increase with the market’s pervasive lack of listings is that total mortgage application volume dropped -6.5% compared with the previous week, according to the Mortgage Bankers Association (MBA).
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Mortgage Demand Drops to 22-Year Low
The MBA indicated that total mortgage volume demand hit a 22-year low during the first week of June.
For the week of June 1, purchase mortgage applications declined -7% and were -21% lower for the same week on a y/y basis.
Joel Kan, an MBA economist, said, “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months. These worsening affordability challenges have been particularly hard on prospective first-time buyers.”
Refinance Demand Continues to Spiral Downward
In addition to purchase mortgage demand dropping, refinance demand (highly sensitive to weekly interest rate moves) dropped another -6% for the week of June 1 and was down -75% the same week one year ago.
The vast majority of mortgage borrowers, over 90%, currently carry interest rates substantially lower than the current rate of 5.40%. The few borrowers who might like to pull cash out of their homes are doing so via second mortgages rather than via refinancing their first liens.
The MBA’s Kan said, “While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week.”
Rates Moved Higher Week of June 6
A separate survey by the Mortgage Daily News indicated that mortgage interest rates pushed even higher during the week of June 6 to 5.49%. (At the time of this writing, it’s unclear whether or not this rate of 5.49% will hold by the end of this week.)
According to Matthew Graham, CEO at Mortgage Daily News, “There’s some chance that the upper boundaries of that range end up being a ceiling for rates, but that will depend on inflation and other incoming economic data. With a key inflation report set to release on Friday morning, the potential for volatility remains high.”
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Thanks to CNBC.