Mortgage demand slipped to the lowest level since December 2018, even after rates declined slightly last week.
Applications for a mortgage to purchase a home fell 1% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 14% lower than the same week one year ago.
Despite a slight decline, mortgage rates are significantly higher than they were at the start of this year.
This as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.33% from 5.46% with points dropping to 0.51 from 0.60 (including the origination fee) for loans with a 20% down payment.
"Mortgage rates fell for the fourth time in five weeks, as concerns of weaker economic growth and the recent stock market sell-off drove Treasury yields lower," said Joel Kan, an MBA economist.
Rising interest rates and steep gains in home prices are hitting affordability hard. Prices continue to rise because there is still so little supply on the market, but different tiers of buyers are seeing different pictures.
"Demand is high at the upper end of the market, and the supply and affordability challenges are not as detrimental to these borrowers as they are to first-time buyers," Kan said.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) decreased to 4.93% from 5.02%. Jumbo loans are mostly held in investor and bank portfolios, as opposed to being sold to Fannie Mae or Freddie Mac. Lenders see them as less risky given the higher credit quality of the borrower to whom they generally go.
Applications to refinance a home loan, which are more sensitive to rate moves than purchase applications, fell 5% for the week and were 75% lower than the same week one year ago. Even as rates moved off their highs over the past few weeks, refinance demand hasn't come back because so many borrowers already went through the process when rates were sitting at record lows last year.
Mortgage rates began this week higher, according to a read from Mortgage News Daily, due to volatility in global markets
"High inflation in Europe and and the easing of Covid-related lockdowns in China both took a toll on bonds," wrote Matthew Graham, COO of Mortgage News Daily.
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