The spring housing market is typically the busiest time of year for homebuyers, but rising mortgage rates are causing some to put their search on hold. According to the Mortgage Bankers Association, mortgage applications for home purchases fell 6% last week compared to the previous week, and volume was down 44% from the same time last year. This marks a 28-year low, as potential buyers struggle to find affordable loans amidst the recent surge in rates.
Applications for mortgages to purchase homes tumbled again last week and are down 44% year-over year.
The average 30-year fixed-rate mortgage rose to 6.7% last week, according to the Mortgage Bankers Association https://t.co/KZQWV6yyK4 pic.twitter.com/jNKDDtjXs4
— Nick Timiraos (@NickTimiraos) March 1, 2023
The average interest rate for a 30-year fixed-rate mortgage with a conforming loan balance rose to 6.71% last week, up from 6.62%. This marks the highest rate since November of last year, and the trend shows no signs of slowing down. In just the past month, rates have increased by 50 basis points, compared to last February when rates were in the 4% range.
Economists say that rising inflation and economic activity are causing rates to go up faster than anticipated. “Data on inflation, employment, and economic activity have signaled that inflation may not be cooling as quickly as anticipated, which continues to put upward pressure on rates,” said Joel Kan, an MBA economist.
The rise in rates is also impacting homeowners who are looking to refinance. Refinance applications fell 6% last week and were 74% lower than the same time last year. “Refinance applications account for less than a third of all applications and remained more than 70% behind last year’s pace, as a majority of homeowners are already locked into lower rates,” added Kan.
The housing market has been booming for the past year, but the recent surge in rates is causing some buyers to think twice before making a purchase. The situation is especially challenging for those looking to buy a home with a lower down payment, as they are more likely to be impacted by the rise in rates. As the market heads into the spring season, it remains to be seen whether rates will continue to rise or stabilize, but for now, potential homebuyers are feeling the squeeze.