Mortgage rates are back on the upswing, after a brief decline in May, and the housing market is still suffering from a lack of listings.
As a result, mortgage demand continues to drop. Total mortgage application volume fell 6.5 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Demand hit the lowest level in 22 years. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.40 percent from 5.33 percent, with points rising to 0.60 from 0.51 (including the origination fee) for loans with a 20 percent down payment.
Refinance demand, which is most sensitive to weekly rate moves, fell another 6 percent for the week and was 75 percent lower than the same week one year ago.
The vast majority of mortgage holders now have rates considerably lower than the current ones, and even those who would like to pull cash out of their homes are choosing second mortgages, rather than refinancing their first liens.
“While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week,” said Joel Kan, an MBA economist.
Applications for a mortgage to purchase a home fell 7 percent for the week and were 21 percent lower than the same week one year ago. “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months.
These worsening affordability challenges have been particularly hard on prospective first-time buyers,” Kan said.