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Mortgage applications and refinancing continue to decline as interest rates rise, according to data from the Mortgage Bankers Association (MBA).
“The interest rate on 30-year fixed-rate mortgages rose to 4.90 percent for the fourth straight week and is now more than 1.5 percentage points higher than a year ago,” wrote Joel Kan, MBA’s associate vice president of economic and industry forecasting , in a statement. “As higher interest rates reduce the incentive to refinance, the application volume has fallen to its lowest level since spring 2019.”
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Housing demand remains strong on a hot job market and wage growth: The US economy posted solid job growth as the workforce rose by 431,000 in March and the unemployment rate fell to 3.6% – the lowest since February 2020.
FILE – Newly completed development of homes for sale built by developer KB Homes are pictured January 4, 2011 in Carlsbad, California. REUTERS/Mike Blake | Reuters photos
But the lack of housing stock, which has resulted in an increased average purchase price, has held the market back.
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“The increased average purchase loan size and steeper 8 percent decline in FHA purchase applications both indicate that first-time buyers are being disproportionately impacted by supply and affordability issues,” Kan added.
Funding activity also fell to 38.8% – down 1.8% from the previous week and plunged over 12% from the same period last year.
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One area where activity picked up was the share of adjustable rate mortgages (ARM), which rose to 6.8% of total activity. An ARM offers a lower initial rate, which may explain the surge in activity: homebuyers will bet they can refinance at a later date, or that interest rates may stay low at that point.
The MBA survey covers over 75% of all US home mortgage applications and has been conducted weekly since 1990.