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The number of applications for mortgages to buy a home or refinance a loan dropped by 8.1 percent during the week of 14 March from the previous week, the Mortgage Bankers Association (MBA) reported.
The volume of applications for new mortgages to buy a home slipped 2 percent and was 12 percent below that during the same week a year ago. The number of applications to refinance a mortgage were off by 14 percent, week on week, and plunged 54 percent from a year earlier.
The U.S. Federal Reserve’s mid-March interest rate increase from 0.25 percent to 0.5 percent underlie the falling numbers, according to analysts cited by CNBC.
The median interest rate for a conventional 30-year, fixed-rate mortgage averaged about 4.2 percent last week, compared to a record low of 2.65 percent at the end of 2020.
“The number of high-quality refi candidates was already down more than 75 percent through last week,” Andy Walden, vice-president of research at data service Black Knight, told CNBC.
“These latest jumps in [interest] rates will likely cut that population even further,” he noted.
“The jump in rates comes as markets moved to price in a much faster pace of rate hikes, as well as expectations” that the Fed will now purchase fewer mortgage-backed securities, MBA chief economist Michael Fratantoni said in a CNBC interview.
The MBA “expects mortgage rates to continue to trend higher through the course of 2022,” he said.
During the same week, mortgage applications rose slightly in number for mortgage loans through the Veterans Administration and Federal Housing Administration, programs popular among low-income buyers.
TREND FORECAST: We have forecast for years that an end to cheap money will slowly sink the housing market. This is the first early evidence that our forecast was correct. This is not rocket science. The higher mortgage rates rise, the further sales will decline.
See also in this issue “Pending Homes Sales Fell 4.1 Percent in February” and our Trend Forecast there.