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Climbing Rates Push Mortgage Demand Down More than 40%
April 6, 2022
Climbing interest rates are slowing demand for mortgages, as fewer homeowners can benefit from refinancing and potential homebuyers are priced out by more expensive lending.
After steadily climbing for the last four weeks, the average interest rate for a 30-year fixed-rate mortgage for loans smaller than $647,200 rose to 4.9% this week, a huge leap from a year prior when the average rate was just 3.36%. Between climbing rates and rapidly rising home prices, the average borrower is now paying about 38% more than they would have for the same home last year, according to data from Realtor.com.
The total volume of mortgage applications fell 6% last week from the year before, according to the Mortgage Bankers Association. That puts volume for the week 41% lower than during the same week last year.
Applications to refinance have been hit the hardest, with refinance demand falling 10% this week from the previous and now standing 62% lower than during the same week last year. This week last year, refinance applications accounted for 51% of all applications. Today, they account for just 38.8%.
Mortgage applications to purchase are 9% lower than they were last year. Facing historic price growth amplified by record-low inventories, more buyers are being sidelined by more expensive lending rates. As buyers are priced out, sellers have started to reduce their prices. According to real estate listing company Redfin, about 12% of homes for sale had a price drop in the last four weeks, up from 9% a year prior.
