The numbers: Mortgage demand fell off a cliff as higher rates spook would-be home buyers.
Demand for mortgages fell 13.3% in the latest week as rates go back to highs last seen in November.
Demand for both purchases and refinancing both fell. That pushed the market composite index — a measure of mortgage application volume — down, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index fell by 13.3% to 199.8 for the week ending Feb. 17, from a week earlier. A year ago, the index stood at 466.4.
Key details: The refinance index fell 2.2% and was down 72% compared to a year ago.
The purchase index — which measures mortgage applications for the purchase of a home — fell by 18.1% from last week.
Demand for purchase applications has plunged to the lowest level in nearly three decades, since 1995, the MBA said.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 6.62% for the week ending Feb. 17.
That’s up from 6.39% the week before, the MBA said.
For homes sold for over $726,200, the average rate for the 30-year was 6.44%.
The 15-year rose to 5.98%, from 5.85% last week. The rate for adjustable-rate mortgages rose to 5.66% from 5.53% last week.
The big picture: The housing market is incredibly rate-sensitive, and it’s demonstrating that in the latest data. Every percentage point increase in mortgage rates affects a buyer’s wallet, so it’s clear why they’re putting off purchasing a home.
Hence the housing sector is likely to see sales remain depressed, throwing cold water on hopes for a recovery. That will also continue to show in home prices in the months ahead.
What are they saying? “This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected,” Joel Kan, vice president and deputy chief economist at the MBA, said.
“The increase in mortgage rates has put many homebuyers back on the sidelines once again,” he added, “especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.”
Market reaction: The yield on the 10-year Treasury note rose beyond 3.93% in early morning trading Wednesday.