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Mortgage demand hits lowest level since 1997

Mortgage applications decreased 14% compared with the previous week

Mortgage applications for the week ending Sept. 30 decreased 14.2% from the prior week, according to the latest survey from the Mortgage Bankers Association.

On an unadjusted basis, the mortgage composite index decreased 14% compared with the previous week. The refinance index decreased 18% from the previous week and was 86% lower than the same week one year ago. The seasonally adjusted purchase index fell 13% from one week earlier and was down 37% from this time last year.

Mortgage rates continued to climb last week, causing another pullback in overall application activity, which dropped to its slowest pace since 1997. The 30-year fixed rate hit 6.75 percent last week – the highest rate since 2006,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone.”

The steep increase in rates has all but wiped out demand for refinancings, though purchase applications are also declining significantly, with affordability at an all-time low. For a $2,500 mortgage payment and 20% down, a homebuyer in late September could afford a $476,000 home. In early 2021, that figure was $759,000.

On Tuesday, mortgage rates had fallen slightly to 6.65% on the average 30-year fixed rate mortgage, according to Mortgage News Daily.

Kan noted that the spreads between the conforming rate compared to jumbo loans widened again, which helped push the share of adjustable rate mortgages to almost 12% of applications.

Mother Nature also played a role in lower application volume for the week ending Sept. 30. Hurricane Ian’s arrival in Florida, the death toll of which has surpassed 100, prompted widespread closings and evacuations. Applications in Florida fell 31% compared to 14% overall.

The refinance share of mortgage activity decreased to 29% of total applications from 30.2% the previous week.

The FHA share of total applications increased to 13.2% from 12.5% the week prior. The VA share of total applications remained unchanged at 10.7% from the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 6.14% from 6.01%, with points increasing to 0.79 from 0.70 (including the origination fee) for 80% LTV loans.

The average contract interest rate for 5/1 ARMs increased to 5.36% from 5.30%, with points decreasing to 1.02 from 1.28 (including the origination fee) for 80% LTV loans.

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