Mortgage demand plunges over 10% as interest rates top 7%

Mortgage demand took a big hit last week, with applications dropping by 10.6% from the previous week as interest rates rose more than 7%, the highest level since early December.

According to the seasonally adjusted Mortgage Bankers Association index For the week ending February 16, the average contract interest rate for a 30-year fixed-rate mortgage with a loan limit of $766,550 was 7.06%, up from 6.87% the previous week.

Borrowing rates for loans over $766,550 rose from 7% to 7.16%, according to the MBA index. CNBC.

As a result, the number of applications for mortgages to buy new homes fell by more than 10%, down about 13% from the same week last year and the lowest level since early November 2023, according to CNBC.

According to the Mortgage Bankers Association, for the week ending Feb. 16, average contract interest rates for 30-year fixed-rate mortgages with loan limits of $766,550 or less and $766,550 or more were 7.06% and 7.16%, respectively. Rose. AFP (via Getty Images)

For reference, the 30-year fixed interest rate for the same period last year was 6.62%.

As recently as December, this number was below 7%. This is welcome news for prospective home buyers who have been deterred primarily by rising borrowing costs and increased competition for the relatively small number of homes for sale.

“Mortgage rates climbed back above 7% last week on news that inflation accelerated in January, dampening hopes for short-term rate cuts,” said Mike Fratantoni, chief economist at the MBA.

Inflation rose a bigger-than-expected 3.1% in January, according to the latest Consumer Price Index, which tracks changes in the cost of everyday goods and services.

Fed Chairman Jerome Powell had already said ahead of the report that the committee “will not reach a level of confidence before its March meeting” to lower interest rates from their current 22-year highs. However, recent inflation data have further heightened doubts that the Fed will cut interest rates soon.

Meanwhile, the number of mortgage refinance applications last week decreased by 11% compared to the previous week, and increased by only 0.1% compared to the same week last year, the MBA revealed.

The number of refinances was above a year ago, but last week’s spike in interest rates made refinancing no longer worthwhile for most borrowers, CNBC reported.

“In a supply-constrained market, both rising interest rates and rising home values ​​are putting pressure on affordability, so potential homebuyers are very sensitive to changes in these rates,” Fratantoni said. “It has become,” he said.

Last week, the number of mortgage applications for new homes fell by 10.6%, about 13% less than the same week last year and the lowest level since early November 2023.
The number of applications for mortgages to buy new homes fell 10.6% last week, about 13% lower than the same week last year and the lowest level since early November 2023. christopher sadowski

As interest rates rose, the share of adjustable-rate mortgages (ARMs) — which tend to offer lower interest rates for a period of time before adjusting higher — rose to 7.4% of total applications, according to the MBA study.

“Million Dollar Listing Miami” real estate agent Sam DeBianchi told Fox’s “Morning with Maria” on Monday that potential homebuyers are discouraged from closing because they’re not in the market to buy their dream home. He said it should be reconsidered.

“Interest rates are generally so high that people try to add all the bells and whistles to their purchases, because of course they want to include everything. They try to shell out too much money.” DeBianchi said. .

“I think as a buyer you need to state your expectations.” [aside]”Don’t buy your American Dream home now,” she continued, “but think about your American Dream home in the future.”

DeBianchi argued that interest rates could rise as residents could enter the hottest housing market of 2024 in places like Buffalo, New York, according to Zillow. Cincinnati, Columbus, Cleveland, Ohio. Atlanta, Georgia. and Orlando and Tampa, Florida.



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