- Demand for mortgages hit its lowest level in 25 years, Mortgage Bankers Association said Wednesday.
- Weekly total mortgage application volume dropped by 14.2% as the 30-year fixed mortgage rate rose to 6.75%.
- Hurricane Ian also crimped demand with the Category 4 storm slamming into Florida.
Demand for mortgages hit its lowest level in 25 years as mortgage rates continued their ascent toward 7%, according to a report from the Mortgage Bankers Association released Wednesday.
Total mortgage application volume dropped by 14.2% in the week ended September 30 compared with the previous week, and overall application activity fell to its slowest pace since 1997, the industry group said.
Refinance activity also fell, logging an 18% weekly decrease. The Refinance Index was 86% lower than the same week a year earlier.
The slowdown in activity occurred as the 30-year fixed mortgage rate reached 6.75%, the highest since 2006, up from 6.52% in the prior week.
“The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in the update.
Borrowing costs in the housing market have soared this year as the Federal Reserve raises interest rates to tamp down on high inflation, and more rate hikes are in the pipeline. The benchmark 10-year Treasury yield, a gauge for loans including mortgages, was at 3.62% on Wednesday, considerably higher than 1.51% at the end of 2021.
Mortgage demand was also hurt last week by Hurricane Ian, as the category 4 storm prompted residents in southwest Florida to evacuate the area and businesses to close. Applications in the state dropped by 31% on a non-seasonally adjusted basis, the MBA said.
The slowdown in the US housing market has also shown up in prices, which are falling at the fastest rate since the Great Financial Crisis, according to data analytics firm Black Knight.
Next month, the Fed is expected to raise rates for a sixth time this year, with investors pricing in expectations for another hefty hike of 75 basis points. The fed funds rate is currently at a range of 3% to 3.25%.