7% Rates Crush Mortgage Market

A "For Sale" sign is posted outside a single family home, Tuesday, Feb. 7, 2023, in Derry, N.H. On Tuesday, the National Association of Realtors reports on sales of existing homes in January. (AP Photo/Charles Krupa)

The persistent rise in mortgage rates is putting a damper on America’s housing market, with notable declines in applications signaling a cooling in one of the economy’s key sectors.

This past week observed a significant 5.6% decrease in mortgage application volume, as reported by the Mortgage Bankers Association. The figure was carefully adjusted to reflect the impact of the Presidents Day holiday.

Despite slight dips, the interest rates for 30-year fixed mortgages remain high, discouraging refinances and new home purchases. Current figures show a decrease to 7.04% from 7.06% on conforming loans within $766,550, while points saw a minimal uptick.

Year-over-year, refinancing activity is scarcely breathing, having contracted by 1%, with a pronounced 7% week-over-week drop—an indicator of a populace wrestling with heightened fiscal demands.

According to Mike Fratantoni, the Mortgage Bankers Association’s lead economist, the recent rate increases are placing a stranglehold on refinancing, notably impacting FHA and VA loan holders — often representing lower-income citizens reliant on more accessible loan thresholds.

Adding to the troubling trend, mortgage applications for home purchases were down by 5% as compared to last week, and a stark 12% when examined against the previous year’s data, underscoring concerns of a broader economic slowdown.