Demand for large mortgages declines as expensive homes persist
A “For Sale” sign in Crockett, Calif. on Tuesday, June 14, 2022.
David Paul Morris | Bloomberg | Getty Images
As consumers worry more about inflation, fewer of them are buying homes — and if they are, they’re buying cheaper homes. Demand for mortgages fell last week compared to the previous week, and the average loan size also fell.
According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage applications for buying a home fell 4% for the week and were 18% lower than in the same week a year ago. The MBA also included an adjustment for the July 4 holiday.
Buyers pulled back due, in part, to higher mortgage rates, but rates held steady last week. The average contractual interest rate for 30-year fixed mortgages with conforming loan balances ($647,200 or less) remained at 5.74%, with points rising from 0.65 to 0.59 (including including set-up costs) for loans with a 20% down payment.
“Buy applications for conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and a deteriorating economic outlook,” said MBA economist Joel Kan. “After hitting a record high of $460,000 in March 2022, the average size of purchase loans was $415,000 last week, pulled down by potential moderation in home price growth and weaker activity. ‘buy weaker at the upper end of the market.’
Home loan refinance applications, which have been incredibly weak due to rising interest rates, rose 2% for the week but were 80% lower than the same week a year ago . At the same time last year, the average mortgage rate was 3.09%. There are very few borrowers left who don’t already have lower rates on their mortgages who could benefit from refinancing.