by Will Kessler
Mortgage applications sank last week as high prices and rising mortgage rates have increased unaffordability for average Americans, according to data from the Mortgage Bankers Association.
The total volume of mortgage loan applications for homes declined 10.6% in the week ending Feb. 16 compared to the previous week when seasonally adjusted, while the purchase index fell 10% in that same time, according to a release from the MBA. The drop in applications follows an increase in the average interest rate for a 30-year fixed-rate mortgage for homes under $766,550 to 7.06% from 6.87% the week prior, intensifying housing unaffordability.
“Mortgage rates moved back above 7% last week following news that inflation picked up in January, dimming hopes of a near term rate cut,” Mike Fratantoni, chief economist at MBA, said in the release. “Mortgage applications dropped as a result with a larger decline in refinance applications. Potential homebuyers are quite sensitive to these rate changes, as affordability is strained with both higher rates and higher home values in this supply-constrained market.”
The number of people refinancing their homes dropped 11%, reducing its share of mortgage activity to 32.6% of total applications, according to the MBA. The rate for mortgages on homes over $766,550 increased to 7.16% from 7.00% a week earlier.
The rate for a 30-year mortgage reached a recent peak in October at 7.79% after rapidly rising from just 2.65% at the beginning of 2021. Existing home sales sank in December to the lowest level since 1995, falling 6.2% year-over-year.
Mortgage rates have faced upward pressure from increases in the federal funds rate, which the Federal Reserve has currently set in a range of 5.25% and 5.50%, the highest in 23 years. The rate was set at such a high range to bring down inflation, which peaked at 9.1% in June 2022 under President Joe Biden and most recently measured at 3.1% in January.
Rent unaffordability has also reached an all-time high, with 22.4 million households now spending more than 30% of their income on rent and utilities, which is an increase of 2 million from three years ago. Prices for shelter have risen19.5% since January 2021, when Biden first took office.
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Will Kessler is a reporter at Daily Caller News Foundation.
