Yahoo Finance U.S. Mortgage Applications Slump As Inflation Takes Toll on Housing Demand
By Scott Kanowsky
Investing.com -- Applications for mortgages in the U.S. touched their lowest level in 22 years last week, in a sign that soaring inflation and concerns over a potential economic downturn may be taking their toll on housing demand.
Mortgage application volume for the week ending on July 15 fell on a seasonally adjusted basis by 6.3% compared to the prior week, according to a survey released on Wednesday by the Mortgage Bankers Association (MBA). The MBA's seasonally adjusted Purchase Index - which measures nationwide home loan applications in particular - declined by 7%.
“Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand," said Joel Kan, the MBA's Associate Vice President of Economic and Industry Forecasting.
Kan added that the decline also aligns with a slowdown in homebuilding activity stemming from a sluggish buyer demand, building material shortages, and surging costs.
Meanwhile, mortgage rates are moving higher amid an uptick in borrowing costs across the broader economy spurred on in part by aggressive recent monetary tightening by the Federal Reserve.
The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances of $647,200 or less rose to 5.82% from 5.74% a week prior. The same rate for mortgages with so-called "jumbo" balances of greater than $647,200 also jumped to 5.31% from 5.25%.
Demand for refinancing, which is more prone to react to rate movements, dropped by 4% to its lowest level since 2000. It is 80% below the same week last year.
"[W]ith most mortgage rates more than two percentage points higher than a year ago, demand for refinances continues to plummet," Kan said.
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