Mortgage rates have been holding at high levels for several weeks now, and that is taking its toll on homebuyers.
The Mortgage Bankers Association reports the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased last week to 6.93% from 6.87%, with points rising to 0.68 from 0.65 (including the origination fee) for loans with a 20% down payment. The rate was 5.43% the same week one year ago. Rates have held above 6.5% since the end of May.
Higher rates are hitting already rough affordability hard, and buyers are clearly struggling. Mortgage applications to purchase a home fell 3% last week compared with the previous week, according to the MBA’s seasonally adjusted index. Applications were 26% lower than the same week one year ago.
“The purchase index decreased for the third straight week to its lowest level since the beginning of June,” said Joel Kan, an MBA economist. “The decline in purchase activity was driven mainly by weaker conventional purchase application volume, as limited housing inventory and rates still close to 7% are crimping affordability for many potential homebuyers.”
Applications to refinance a home loan also dropped 3% for the week and were 32% lower than the same week one year ago.
Mortgage rates began this week higher and could continue to rise ahead of the all-important monthly employment report expected to be released Friday.
“The bond market is clearly bracing for economically bullish data. If those fears are realized, rates could be at 20-year highs by the end of this week,” said Matthew Graham, chief operating officer at Mortgage News Daily.