The once-hot housing market was turned on its heels by the average rate on the 30-year fixed shot over six percent in June. The damage was done before rates pulled back. Mortgage demand will fall further because rates are going past 6.
According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.94% last week from 5.80% the previous week. There were a few days when the rate went above 6% on another survey.
"Mortgage rates moved higher over the course of last week as markets continued to re-assess the prospects for the economy and the path of monetary policy, with expectations for short-term rates to move and stay higher for longer."
Mortgage applications to refinance a home loan fell another 1% for the week and were 80% lower than a year ago. One year ago, mortgage rates were at record lows, so there are very few people who haven't already taken advantage of the current low rates.
The number of mortgage applications to purchase a home was lower last week than it was a year ago. A $400,000 home would cost a person close to $700 more per month than it did a year ago.
The recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand.
As investors await speeches by Federal Reserve members that could give more insight into how large the next rate hike might be, mortgage rates shot up to start this week. Home prices are cooling due to higher mortgage rates, but it will likely take more cooling before affordability fully recovers.
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