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• The Market Composite Index slips to 466.4 from the last week
• The Refinance Index falls 16 % from the previous week
U.S. mortgage applications plummeted to their lowest level in more than two years last week, signaling that rising mortgage rates are a hindrance to the real estate market.
The Mortgage Bankers Association (MBA) said that its Market Composite Index, a gauge of mortgage loan application volume, slipped 13.1 % to 466.4 from the previous week. It was the lowest point since December 2019.
The Refinance Index fell 16 % from the previous week and was down 56 % from the same week a year earlier.
"Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022. Conventional refinances, in particular, saw a 17 percent decrease last week," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.
The seasonally adjusted Purchase Index fell 10% from the previous week.
Purchase applications, which were already restrained by high sales prices and limited availability, were also hurt by the increased rates and fell for the third week in a row, Kan said.
For 30-year fixed-rate mortgages with conforming loan amounts ($647,200 or less), the average contract interest rate climbed to 4.06 % from 4.05 %, with points increasing to 0.48 from 0.45 (including the origination fee) for 80 % loan-to-value ratio (LTV) loans.
Mortgage rates have been rising, and the Federal Reserve is expected to begin hiking rates in March to combat excessive inflation. According to data, new-home sales reached a nine-month high in December, while purchases of previously owned homes reached their highest level in a year.
Picture Credits: Housing.com