Rising for the third consecutive week, mortgage rates reached their highest levels since November, causing a 2.7% drop in mortgage application demand compared to the previous week. This decrease in demand can be attributed to the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rising to 7.24% from 7.13%.
Applications to refinance home loans, which are highly influenced by weekly fluctuations in interest rates, declined by 6% for the week. On the other hand, applications for mortgages to purchase homes fell by 1% for the week. The decrease in both refinancing and purchasing applications can be concerning for the housing market.
Double Whammy for Potential Buyers
As home prices continue to rise alongside interest rates, potential buyers are facing a double whammy in terms of reduced purchasing power. This double blow is causing many home buyers to delay their purchase decisions due to affordability constraints and a lack of housing supply.
With the affordability of traditional fixed-rate mortgages becoming more challenging, the adjustable-rate mortgage share of applications rose to 7.6% last week. ARMs offer lower initial interest rates and the ability to be fixed for up to 10 years, but they come with higher risk due to potential rate adjustments in the future.
While mortgage rates have slightly eased in the current week, there hasn’t been significant economic data to sway them. However, the overall trend of rising rates is concerning for homebuyers and may continue to impact the housing market in the coming months. It is essential for potential buyers and current homeowners to stay informed about market trends and consider their financial options carefully in light of these developments.