Home buyer demand Housing loan New data from the Mortgage Banking Association show signs that the housing market is starting to cool last week as average interest rates on the most popular US mortgages remained close to their 13-year highs.
Mortgage applications to buy a home are down 12% on a weekly basis, down 15% compared to the same week a year ago. It is the first time in three weeks that monthly mortgage demand has declined.
Mortgage rates have fallen slightly from record highs last week, but average 30-year mortgage rates are still around 5.378%. By comparison, just one year ago, the 30-year rate was 3.00%. Interest rates have skyrocketed by 2% since the beginning of this year. This is the fastest growth pace since May 1994.
Joel Kang, vice president of economics and industry forecasting at the MBA, said: “General uncertainties about the short-term economic outlook, and recent stock market volatility, can delay home searches for some households.”
Refinancing activity has plummeted as mortgage rates have risen. Mortgage refinancing applications decreased by another 10% weekly. Overall, refinancing demand is down 76% compared to a year ago.
The latest data is because the Federal Reserve aims to calm the housing market lit up during the COVID-19 pandemic and curb inflation high in the sky.
Policymakers are widely expected to halve the benchmark federal funds rate earlier this month and approve at least two similar-scale rate hikes at their next meetings in June and July. Mortgage rates rose to 5.3% after rising 50 basis points in May, according to mortgage financier Freddie Mac.
Federal Reserve Chairman Jerome Powell reiterated that sentiment at a live event in the Wall Street Journal on Tuesday, promising to “push” inflation until it fell in line with the central bank’s 2% target. Raising interest rates tends to raise interest rates on consumer and corporate loans, slowing the economy by forcing employers to cut spending.
“What we have to see is that inflation is declining in a clear and compelling way, and we’ll keep pushing until we see it,” Powell said. “If it involves moving beyond the widely understood level of neutrality, we do not hesitate to do it at all.”