Rising interest rates are crushing the mortgage market, as few valuable homeowners can now benefit from refinancing and more potential home buyers are running out. The total volume of mortgage applications fell another 6% last week compared to the previous week, according to the seasonally adjusted index of the Bank Mortgage Association. Sales volume decreased by 41% from the same week a year ago. The average contract interest rate on a 30-year fixed rate mortgage with compliant loan balances ($ 647,200 or less) increased to 4.90% from 4.80%, with points falling to 0.53 from 0.56 (including commission) on loans with 20% payment reduction. That percentage was just 3.36% a year ago. This is the fourth consecutive week of increases. Mortgage refinancing applications, which have been steadily declining for months, have fallen by 10% from week to week. Refinancing demand was 62% lower than the same week a year ago. “The volume of mortgage applications continues to decline due to the rapid rise in mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” said Joel Kan, an MBA economist. “As higher interest rates reduce the incentive for refinancing, the volume of applications has decreased to the lowest level since the spring of 2019.” The refinancing share of all applications fell to 38.8% from 51% a year earlier. Home loan applications fell by 3% for the week and were 9% lower than the same week a year ago. A strong labor market with ever-increasing wages keeps demand for housing warm, but the supply of existing homes for sale is still extremely low. Bidding wars tend to be the rule, despite the exception. Affordable prices are falling fast and entry level buyers are being sidelined. “The increase in the average loan size and the sharpest 8% drop in FHA purchase requests are both indications that first-time buyers are disproportionately affected by supply and affordability challenges,” Kan added. The drop in mortgage operations is causing layoffs in companies such as Movement Mortgage and Better.com. Mortgage companies had huge recruitments in the first year of the Covid pandemic, as interest rates hit more than a dozen record lows and refinancing and market demand rose.
