Mortgage Applications Fall 5.6% As Higher Rates Deter Homeowners and Buyers

By Thea Felicity

Feb 28, 2024 09:59 AM EST

(Photo : Photo by SUSANNAH IRELAND/AFP via Getty Images)
An estate agent board advertising properties to rent and sell is seen outside a row of Edwardian terraced houses in Streatham Hill, in South London, on April 1, 2023.

In response to escalating mortgage rates, the housing market is witnessing a discernible downturn in demand from both existing homeowners and potential buyers.

According to recent data released by the Mortgage Bankers Association (MBA), total mortgage application volume experienced a notable 5.6% decline last week compared to the preceding week.

This trend was further accentuated by an additional adjustment to accommodate the Presidents Day holiday.

As reported by CNBC, the average contract interest rate for 30-year fixed-rate mortgages, pertaining to conforming loan balances of $766,550 or less, slightly decreased from 7.06% to 7.04%.

Concurrently, points associated with these loans rose marginally from 0.66 to 0.67, reflecting a modest uptick compared to the same period one year prior.

As a direct consequence of these fluctuations, applications for home loan refinancing witnessed a considerable 7% drop compared to the prior week, with figures remaining 1% lower in comparison to the corresponding week from the previous year.

Mike Fratantoni, MBA's chief economist, highlighted the impact of higher rates, particularly noting a pronounced decrease in FHA and VA refinancing applications.

This year, Fratantoni emphasized only a 19% increase in mortgage demand for newly constructed homes in January.

Why Mortgage Applications Are Declining

Interestingly, the dwindling demand is not confined to refinancing endeavors alone; applications for mortgage loans for home purchases also experienced a notable 5% decline for the week.

Figures from MBA register a stark 12% downturn compared to the same timeframe in the preceding year.

Although there is low demand, mortgage rates keep going up, making it harder for people to buy homes. The rates are now similar to what they were in early December 2023.

According to Mortgage News Daily, there's no clear reason why rates are changing so much, meaning the mortgage market is uncertain.

With these numbers, homeowners and people who want to buy homes are expected to be careful and smart about dealing with unstable mortgage rates.