Mortgage applications have fallen to their lowest level in 25 years as interest rates hit record highs, according to the Mortgage Bankers Association (MBA).
The Refinance Index declined 0.1 percent on a weekly basis and was down 86 percent compared to a year prior. The Purchase Index fell 2 percent from the previous week on a seasonally adjusted basis to its slowest pace since 2015 and was over 40 percent lower than the previous year.
Mortgage rates have increased for the 10th consecutive week, with the 30-year fixed rate reaching 7.16 percent, Joel Kan, MBA’s vice president and deputy chief economist, said in the news release.
“The ongoing trend of rising mortgage rates continues to depress mortgage application activity, which remained at its slowest pace since 1997,” Kan said.
MBA is expecting purchase originations to decline by 3 percent in 2023 due to “economic and housing market weakness,” he said. Refinance volume is projected to fall by 24 percent.
The Housing Market
According to Chen Zhao, a Redfin economics research lead, the U.S. housing market has come to a standstill, but he said the driving forces behind this slowdown are different than those that caused the slowdown at the beginning of the pandemic.“The housing market is going to get worse before it gets better,” Zhao stated in the Redfin report. “With inflation still rampant, the Federal Reserve will likely continue hiking interest rates. That means we may not see high mortgage rates—the primary killer of housing demand—decline until early to mid-2023.”