Mortgage demand tumbled last week, with application volume falling by 10.6% compared to the previous week, after interest rates soared past 7% again, the highest level recorded since December 2023.
The average rate for a 30-year mortgage spiked above 7% last week. This resulted in plummeting interest in mortgage demand, with applications dropping 10.6% on a seasonally adjusted basis from a week earlier, according to a recent report from the Mortgage Bankers Association (MBA). The numbers have sat at the lowest level since early November 2023.
"Mortgage rates moved back above 7 percent last week following news that inflation picked up in January, dimming hopes of a near term rate cut," Mike Fratantoni, MBA's SVP and Chief Economist, said in the report. "Mortgage applications dropped as a result with a larger decline in refinance applications. Potential homebuyers are quite sensitive to these rate changes, as affordability is strained with both higher rates and higher home values in this supply-constrained market."
More specifically, the FHA share of total mortgage applications dropped to 13.2% from last week's 13.5%. The VA share also decreased to 12.1% from 13.3%.
In addition, the refinance share of mortgage activity decreased to 32.6% from 34% the previous week.
Where Mortgage Rates Stand
Mortgage rates have remained below the most recent peak of 8% in October 2023. However, they still remain above the rates seen before the Federal Reserve aggressively hiked interest rates as part of an effort to cool down inflation. For instance, mortgage rates hovered around 3% this same time in 2022.
Mortgage rates inched above 7% last week following news that inflation picked up again in January, dimming hopes that the Feds could impose a round of rate cuts.
"A lot of my customers are paying close attention to what the Federal Reserve says. Buyers and sellers came off the sidelines in December when the Fed signaled it would lower interest rates three times in the next year, but now some are getting cold feet because the Fed indicated that rate cuts may come later than expected," Hal Bennett, a Redfin Premier real estate agent in Bellevue, WA, said in a release.
Apart from soaring mortgage rates, the lack of available supply means home prices have remained elevated.
