Mortgage Demand Takes a Hit as Interest Rates Surge
As the housing market enters its slowest period of the year, a sharp increase in mortgage interest rates has dealt a blow to mortgage demand. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume plummeted 21.9% over the two weeks ended December 27, 2024, compared to the previous week.
Rising Interest Rates Take Their Toll
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less jumped to 6.97% from 6.89%, with points rising to 0.72 from 0.67, including the origination fee, for loans with a 20% down payment. This marks a 21-basis-point increase from the previous year.
Refinance Applications Take the Biggest Hit
Applications to refinance a home loan, which are highly sensitive to interest rate fluctuations, fell a staggering 36% from two weeks prior. Although they remained 10% higher than the same period last year, the decline is a clear indication of the impact of rising interest rates.
Purchase Applications Also Feel the Pinch
Applications for a mortgage to purchase a home dropped 13% during the two-week period and were 17% lower than the same period one year ago. While December is typically a slow month for home sales, these numbers are seasonally adjusted, and the annual comparison reveals significant weakness.
Housing Market Challenges Persist
The current housing market is characterized by high prices and higher interest rates, leading to a buildup of inventory. Many homes have been sitting on the market for months, making it a challenging time for buyers and sellers alike.
Volatility in the Bond Market
Mortgage rates started the week above 7% on the 30-year fixed, according to a separate survey from Mortgage News Daily. The bond market’s volatility, particularly during the holiday season, adds to the uncertainty surrounding mortgage rates.
Uncertainty Ahead
As the housing market navigates this challenging period, it remains to be seen how mortgage rates will respond in the coming weeks. One thing is certain, however: the impact of rising interest rates on mortgage demand will continue to be felt.
Leave a Reply