The recent increase in mortgage rates has led to a decrease in mortgage application demand. According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage application demand dropped 2.7% compared to the previous week. This decrease can be attributed to the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increasing to 7.24% from 7.13%.
Applications to refinance a home loan, which are most sensitive to weekly moves in interest rates, fell 6% for the week. Additionally, applications for a mortgage to purchase a home fell 1%. This decline in applications for home purchases can be concerning as potential buyers may delay their purchase decisions due to strained affordability and low supply in the housing market.
As home prices rise along with interest rates, potential buyers are facing a double whammy. The combination of increasing home prices and rising interest rates is impacting buyers’ purchasing power. This has led to a decrease in purchase applications as buyers struggle to afford homes in the current market conditions.
In response to the rising interest rates, the adjustable-rate mortgage share of applications rose to 7.6%. While ARMs offer lower rates initially, they can be risky as the rates can adjust over time. However, some buyers may turn to ARMs as a way to take advantage of lower rates in the short term.
While mortgage rates have eased slightly in the current week, there hasn’t been much economic data to influence them. It will be important to monitor the trend of mortgage rates in the coming weeks to see if they continue to rise or if there will be fluctuations based on economic indicators.
Overall, the impact of rising mortgage rates on homebuyers is significant, with decreased application demand and affordability challenges facing potential buyers in the current market. As interest rates continue to fluctuate, it will be important for buyers to consider their options carefully and stay informed about market trends.