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Mortgage demand tumbles as interest rates rise to highest level since December

Important measures home purchase The number of applications decreased last week due to a sharp rise in mortgage interest rates.

Mortgage Bankers Association (MBA) Index Applying for a mortgage loan New data released on Wednesday showed that stocks fell 2.3% in the week ending February 9 compared to the previous week.

The data also showed that the average interest rate on the popular 30-year loan rose to 6.87%. Although the rate has fallen from a peak of 8% in October, it is the highest interest rate since December 2023.

“Application activity was slow last week as mortgage rates rose across the board,” said Joel Kang, deputy chief economist at the MBA.

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December 26, 2023 Home in Hercules, CA. (Photographer: David Paul Morris/Bloomberg via Getty Images/Getty Images)

Demand for housing is stalling as interest rates rise. Applications for mortgages to buy homes fell 3% from the previous week. The number of applications decreased by 12% compared to the same period last year.

Refinance demand also fell last week, falling 2% from the previous two weeks, according to the survey. Compared to the same period last year, refinance applications are up about 12%.

“Purchase offers remain low due to rising interest rates, existing housing stock remains low, and affordability is becoming more difficult,” Kang said. “Refinance applications are down and remain weak, and interest rates are still higher than a year ago.”

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The housing market, which is sensitive to interest rates, has cooled rapidly in the wake of the financial crisis. federal reserve Aggressive tightening campaign. Policymakers have raised the benchmark federal funds rate 11 times in 16 meetings to quell stubborn inflation and slow the economy.

Officials signaled at their most recent policy meeting in January that they had finished raising rates but were not yet ready to cut rates. Investors had previously embarked on a series of aggressive rate cuts starting as early as March. Most economists now expect rate cuts to begin in May or June.

For sale sign outside a home in Atlanta

A sign outside a home for sale in Atlanta on September 6, 2023. (Photographer: Elijah Nouvage/Bloomberg via Getty Images / Getty Images)

Rising mortgage rates not only suppress consumer demand, but also limit inventory. Sellers who locked in low mortgage rates before the pandemic are reluctant to sell as interest rates continue to hover near 20-year highs, leaving eager buyers with few options. .

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Available housing supply remains an astonishing 34.3% lower than typical pre-crisis volumes. COVID-19 pandemic It started in early 2020, according to another report published by Realtor.com.

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