The fast-rising pace of mortgage rates in the U.S. is having a chilling effect on borrowers.
The number of people applying for a new mortgage tumbled 13.1% over the past week, says the Mortgage Bankers Association (MBA). That brought applications to the lowest point since December 2019.
“Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022. Conventional refinances in particular saw a 17% decrease last week,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
The average 30-year fixed mortgage, as of Wednesday morning, stands at 4.12%, according to Mortgage News Daily. That’s a full point higher than a year ago.
While the number of new loan applications is down for the third consecutive week, the average loan size hasn’t changed. MBA says the average asks remain near record highs. The average purchase loan size came in at $450,200, compared to the previous high, set on Feb. 11, of $453,000.
The drop in mortgage applications could be a bellwether of declining buyer interest in the red-hot housing market. Prices continue to increase, and they rose an average of 18.8% nationwide in December, according to the latest Case-Shiller index.
Experts are already adjusting their predictions, however. CoreLogic, for instance, says home price growth will be closer to the historical average moving forward, forecasting a rise of 3.5% between December 2021 and December 2022, which would be significantly slower growth than last year.
A slowdown in price growth won’t offer much relief to buyers, though. Prices have been escalating for two years, but new buyers were able to counter that with extremely low mortgage rates. Now, as rates increase at a breathtaking pace, monthly payments will be even higher, which could price many potential buyers out of the market.
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