Mortgage applications in the US hit a new low since 1997, data from the Mortgage Bankers Association (MBA) showed. For the week ending Nov. 4, the MBA’s overall activity index fell 0.1% on a seasonally adjusted basis from one week earlier.
Refinancing demand decreased 4% from the previous week and was 87% lower than the same week one year ago.
The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index decreased 1% compared with the previous week and was 41% lower than the same week one year ago.
Meanwhile, the 30-year fix mortgage rate – the most popular mortgage product-went up 8bps to 7.14%, after falling for the first time in eleven weeks the week before, and holding close to levels not seen since 2001.
The average contract interest rate for 15-year fixed-rate mortgages increased to 6.40% from 6.37%, with points increasing to 1.13 from 1.05 (including the origination fee) for 80% LTV loans.
The average contract interest rate for 5/1 ARMs increased to 5.87% from 5.79%, with points increasing to 0.92 from 0.90 (including the origination fee) for 80% LTV loans, MBA said.
On Nov. 2, the US Federal Reserve made its fourth consecutive 75-basis-point rate hike. The housing market is particularly sensitive to changes in the Federal Reserve’s interest rates, and with policymakers’ hawkish policy path this year, housing has become increasingly unaffordable. By raising rates, the Federal Reserve makes it costlier to take out a loan, causing people to borrow and spend less.
“Mortgage rates edged higher last week following news that the Federal Reserve will continue raising short-term rates to combat high inflation. The 30-year fixed rate remained above 7 percent for the third consecutive week, and there were increases for most other loan types,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications increased for the first time after six weeks of declines but remained close to 2015 lows, as homebuyers remained sidelined by higher rates and ongoing economic uncertainty. Refinances continued to fall, with the index hitting its lowest level since August 2000.”
The survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts.
