IMPORTANT POINTS:
- Due to the increase in interest rates, demand in the mortgage market has stagnated significantly.
- The 30-year fixed jumbo mortgage rate rose to 7.34%, the highest rate in history.
- Last week, applications to refinance a mortgage loan fell 1% and 21% compared to the same period last year.
- Regarding traditional mortgage applications for the purchase of a home, they fell 2% in the week and 27% compared to the same week in 2022.
The mortgage market is heading for a crisis if the numbers revealed this last week continue.
First, mortgage interest rates skyrocketed to a level not seen in 23 years. This logically caused demand to plummet and reach the lowest figure since 1996.
The Mortgage Bankers Association also reported that the total volume of mortgage applications fell 1.3% last week compared to the previous week. In annual terms, volume collapsed by 25.5%.
Mortgage market rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less increased 0.1% to 7.41%, from 7.31%. To have a dimension of the acceleration of rates, the value a year ago was 6.52%.
The 30-year fixed jumbo mortgage rate also rose to 7.34%, the highest rate in the history of the MBA’s jumbo rate series dating back to 2011.
“According to the FOMC’s most recent projections, rates are expected to remain higher for longer, fueling the rise in Treasury yields. Overall, applications are down as both prospective buyers and homeowners continue to feel the impact of these elevated fees.”Joel Kan, MBA economist.
One of the data that most worries economists is that mortgage applications to buy a home fell 2% during the week and fell 27% compared to the same week last year.
The equation of what is happening in the mortgage market is simple: the offers of homes for sale are very low, the interest rates to purchase a property have skyrocketed and, as a consequence, very few people agree to buy a home.
Added to this is the imbalance between supply and demand, which causes property prices to also rise sharply, further alienating potential buyers.
