Mortgage applications fell last week, stepping back after a spike as rates reached 20-year highs.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – declined by 1.3%, down from the week prior’s 5.4% increase.
Adjusted purchase applications sank by 2%, while the unadjusted index fell by 2% from the week before and was 27% lower YOY.
Declines can be attributed to the average interest rate for a 30-year fixed loan increasing 10 bps to 7.41%, the highest rate since December 2000.
Meanwhile, the jumbo rate hit its highest point ever in MBA’s jumbo series data at 7.34%, which dates to 2011.
“Based on the FOMC’s most recent projections, rates are expected to be higher for longer, which drove the increase in Treasury yields. Overall applications declined, as both prospective homebuyers and homeowners continue to feel the impact of these elevated rates,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
Climbing rates make monthly payments unaffordable for many Americans, pushing them out of the market. Homebuyers feel their impact even more now as home prices shoot back to record-breaking levels. Prices have soared across the nation for six straight months, leading the total value of residential real estate to a new high of $52 trillion.
The typical U.S. monthly mortgage payment currently sits at an all-time high of $2,632.
“The purchase market, which is still facing limited for-sale inventory and eroded purchasing power, saw applications down over the week and 27% behind last year’s pace. Refinance activity was down over 20% from last year and accounted for approximately one-third of applications. Many homeowners have little incentive to refinance,” Kan noted.
Refinances slipped by 1%, accounting for 31.9% of total applications. In the past decade, refis averaged 58% of total activity.
The FHA share of total applications fell to 14.1%, with their interest rate rising to 7.12%, the highest level since March 2002.
ARM applications rose to 7.5% of the total. The VA’s share was down 0.1% to 10.9%, while the USDA’s share increased from 0.4% to 0.5%.