Mortgage Rates Surge to Highest Level Since July, Dampening Home Loan Demand

Mortgage rates in the U.S. have risen for the fourth consecutive week, reaching their highest levels in months. This increase has further weakened mortgage demand, with total application volume dropping by 3.7% compared to the previous week, according to the Mortgage Bankers Association’s adjusted index.

The average interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 6.99%, the highest rate. Points decreased to 0.68, reflecting a slight drop in fees.

Refinance applications rose 2%, but they are still 6% lower than last year. On the other hand, mortgage applications for home purchases dropped by 7%, showing a 15% decline year-over-year. Despite a higher housing inventory, higher mortgage rates and home prices are deterring potential buyers.

Joel Kan, Vice President of the MBA, noted that applications for both conventional and government loans decreased, reaching their slowest pace. Refinance applications rose primarily due to an increase in VA refinances.

The increase in mortgage rates is largely driven by economic data, including inflation and job openings. As the economy continues to show signs of growth, mortgage rates could continue to climb or potentially stabilize, depending on upcoming economic reports.