Interest Rate Surge Sends Mortgage Demand Plummeting

The housing market is facing a significant challenge as interest rates surge higher, causing mortgage demand to drop. The Mortgage Bankers Association reported that total mortgage application volume decreased by 4.1% last week compared to the previous week. This decline is attributed to rising interest rates, with the average contract rate for 30-year fixed-rate mortgages increasing to 6.97%, up from 6.85%. According to a separate survey by Mortgage News Daily, rates had moved over 7% by last Thursday.

Refinance applications were particularly affected, dropping 9% for the week and 65% lower than the same week one year ago. This decline is due in part to the current level of interest rates eliminating much of the benefit to refinance for many borrowers. Applications for purchase mortgages also decreased by 1% for the week and 19% lower than the same week last year.

High home prices continue to be a challenge for potential buyers, while the supply of homes for sale has been gaining in some areas, mostly on the higher end of the market. Mortgage rates have continued to rise, reaching 7.22% on Tuesday according to Mortgage News Daily, just ahead of the Federal Reserve's next meeting.