Refinance demand is now half what it was a year ago, as mortgage rates rise again
Mortgage rates have climbed to their highest level in three years, causing a significant decline in both home purchase and refinance applications. Economists note that the current rate environment provides little incentive for homeowners to refinance.
Why it matters
Rising mortgage rates are cooling the housing market and increasing affordability challenges for potential homebuyers.
Mortgage rates last week rose to the highest level in nearly three years. That kept demand for both refinances and home purchases on their steep and steady decline.
Total mortgage application volume dropped 4.2% compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, increased last week to 7.49% from 7.30%, with points rising to 0.84 from 0.75, including the origination fee, for loans with a 20% down payment.
Applications to refinance a home loan, which are highly rate-dependent, dropped 8% for the week and were 56% lower than the same week one year ago. As rates rise each week, the pool of eligible refinances drops.
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