Mortgage demand falls to nearly half of what it was a year ago, as interest rates continue to rise

Mortgage demand continued to fall last week, as mortgage rates climbed to their highest level since 2010. The Mortgage Bankers Association says total application volume fell 5% last week compared with the previous week and was half of what it was a year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.20% last week from 5.13%, with points rising to 0.66 from 0.63 for loans with a 20% down payment. The rate was 200 basis points lower a year ago.

Mortgage rates reached their highest level in over a decade because of concerns about rapid inflation and tighter U.S. monetary policy. The associate vice president of economic and industry forecasting said rates increased for all loan types.

After hitting record lows, very few borrowers are able to benefit from a refinance now that rates are rising quickly. The demand fell another 8% for the week and was much lower than a year ago. It is the sixth straight week of declines in refinancing. The share of mortgage activity that was refinanced decreased from the previous week.

The number of mortgage applications to purchase a home fell for the week and were lower than a year ago. As housing becomes more expensive, the annual decline is growing.

In a housing market with affordability challenges and low inventory, higher rates are causing a delay in home purchase demand. Home purchase activity has been volatile in recent weeks and has yet to see the typical pickup for this time of the year.

After the last housing crash, buyers shied away from the riskier types of mortgages, but now they're turning to them. The share of applications with the ARM was 8.5% last week. Fixed rate loans can be used for terms such as seven or 10 years, and are more carefully written than they used to be.

Treasury yields rose this week as mortgage rates continued to climb. The nation's homebuilders are feeling the impact of higher rates. A report from the U.S. Census shows a decrease in building permits for single- family homes. Future construction is an indicator of these. The builders said they are seeing slower buyer traffic in their model homes due to rising mortgage rates.