Mortgage demand is now roughly half of what it was a year ago, as interest rates move even higher

A “For Sale” sign outside a house in Albany, California, on Tuesday, May 31, 2022. Homebuyers are facing a worsening affordability situation with mortgage rates hovering around the highest levels in more than a decade.

The volume of mortgage applications was lower last week than it was a year ago. Demand from potential buyers is being hit by sky-high home prices and a shortage of houses for sale as interest rates rise.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.65% from 5.40%, with points increasing to 0.71 from 0.60 for loans with a 20% down payment. According to a daily measure from Mortgage News Daily, the average rate went up to 6.18% on Tuesday.

"Mortgage rates followed Treasury yields up in response to higher-than- expected inflation and anticipation that the Federal Reserve will need to raise rates at a faster pace."

The volume of mortgage applications rebounded slightly. There was a 4% increase in demand for a mortgage last week, but it was still 75% lower than a year ago.

The 8% increase in mortgage applications for the week was less than a year ago.

After the Memorial Day holiday week, application activity rebounded but remained below pre-holiday levels.

The housing market is in a tough spot. Home prices are overheated and affordability is in the basement after two years of record low rates. The layoffs of major real estate companies were announced Tuesday.

Mortgage rates went up more quickly than any other time in history. We could be facing years, not months, of less home sales. Glenn Kelman wrote on the company's website that he didn't know what would happen if the company's share price fell from 97 to 8.