Mortgage Rates Dampen US Home Loan Applications

Written by Camilla Jessen

Mar.21 - 2024 10:18 AM CET

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Photo: Shutterstock.com
Photo: Shutterstock.com
Rising rates contribute to a decline in mortgage demand, with challenges in housing affordability looming.

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The Mortgage Bankers Association (MBA) reported a decline in U.S. mortgage applications last week, attributing the decrease to climbing mortgage rates.

The report, released on Wednesday, shows a 1.6% dip in the market composite index on a seasonally adjusted basis for the week ending March 15. On an unadjusted basis, the index declined by 1% compared with the previous week.

Joel Kan, MBA's Vice President and Deputy Chief Economist, expressed concerns over inflation and its implications for future Federal Reserve actions.

"Mortgage rates increased last week as incoming data showed inflation was still hotter than expected, which stoked concerns about the timing and extent to which the Fed might be able to reduce the fed funds rates this year" he remarked.

Kan observed that both purchase and refinance activities dropped in response to the rate changes.

He pointed out, "With housing supply remaining tight and prices elevated, we saw the average loan size for purchase applications reach its highest point since May 2022."

The report also noted increases in the average contract interest rates for mortgages, with the 30-year fixed mortgage rate climbing to 6.97% from 6.77%, and the 15-year fixed-rate mortgages increasing to 6.49% from 6.37%.

The MBA survey covers more than 75% of U.S. retail residential mortgage applications.

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