(CNBC) The pain in the mortgage market is only getting worse as higher interest rates and inflation hammer American consumers.
Mortgage demand fell more than 6% last week compared with the previous week, hitting the lowest level since 2000, according to the Mortgage Bankers Association’s seasonally adjusted index.
Applications for a mortgage to purchase a home dropped 7% for the week and were 19% lower than the same week in 2021. Buyers have been contending with high prices all year, but with rates almost double what they were in January, they’ve lost considerable purchasing power.
“Purchase activity declined for both conventional and government loans as the weakening economic outlook, high inflation and persistent affordability challenges are impacting buyer demand,” said Joel Kan, an economist for the MBA.
While buyers are less affected by weekly moves in interest rates, the broader picture of rising rates has already taken its toll. Mortgage rates moved higher again last week after falling slightly over the past three weeks.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.82% from 5.74%, with points increasing to 0.65 from 0.59 (including the origination fee) for loans with a 20% down payment. That rate was 3.11% the same week one year ago.
Demand for refinances, which are highly rate sensitive, fell 4% for the week and were 80% lower than the same week last year. Those applications are also at a 22-year low, but the drop in demand from homebuyers caused the refinance share of mortgage activity to increase to 31.4% of total applications from 30.8% the previous week.