Sharp drop in mortgage applications attributed to the sudden surge in mortgage rates.
Mortgage applications plummeted by 13.3% from the prior week, with purchase applications reaching their lowest level since 1995, according to the latest data from the Mortgage Bankers Association’s weekly survey.
The decline comes as the 30-year fixed rate soared to 6.62% - its highest rate since November 2022. The refinance index posted a 2% decrease from the previous week and was 72% lower than the same week one year ago. Meanwhile, seasonally adjusted purchase applications decreased by 18% from the previous week, and the unadjusted purchase index decreased by 4% compared to the previous week.
“This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected,” said MBA deputy chief economist Joel Kan. “The increase in mortgage rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.”
The refinance share of mortgage activity increased to 32.5% of total applications from 32% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.6% of total applications.
Overall, Kan anticipates that refinance activity will remain depressed for some time, given that rates are over 2.5 percentage points higher than a year ago.
The report also showed a decline in the FHA share of total applications, which decreased to 12.1% from 12.6% the week prior. The VA share of total applications fell to 12% from 12.6% the previous week, and the USDA share of total applications remained unchanged at 0.6%.