US mortgage demand falls 19% year-on-year amid surge in rates
In the United States, the number of mortgage applications for home purchases fell by 1% over the week and by 19% compared with the same period last year. The total volume of mortgage loan applications declined by 4.1% from the previous week, according to the seasonally adjusted Mortgage Bankers Association index. Data for the previous week were also adjusted to account for the Labor Day holiday, CNBC Top News reports.
Rates on 30-year loans
The average contract rate for 30-year fixed-rate mortgages on loans of up to $832,750 rose to 6.97% from 6.85%. For loans with a 20% down payment, points, including the origination fee, increased from 0.67 to 0.72.
According to Mortgage News Daily, rates exceeded 7% by last Thursday, while on Tuesday the average rate on a 30-year loan reached 7.22%. This is nearly one percentage point higher than a year ago.
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Decline in refinancing applications
The number of mortgage refinancing applications decreased by 9% over the week and by 65% year-on-year. A year earlier, the rate on a 30-year fixed mortgage had been 58 basis points lower.
Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association, said that concerns in the market over a sharp rise in energy prices, persistently high inflation, and future monetary policy contributed to higher bond yields and mortgage rates. According to him, the current level of rates has reduced the benefit of refinancing for many borrowers.
Potential homebuyers are also facing high prices. Although the supply of homes for sale is growing in many parts of the country, a significant share of it is concentrated in the more expensive segment of the market.
