Mortgage rates soared to their highest level in nearly three years last week, sending mortgage applications in the opposite direction.
Applications dropped 1.2 percent in the week ending March 11, according to the Mortgage Bankers Association. The Market Composite Index, which measures loan application volume, dropped 1.2 percent on a seasonally adjusted basis from the previous week.
Applications for refinancing dropped 3 percent from the previous week and 49 percent year-over-year.
The hampered interest from homeowners and potential buyers comes as mortgage rates hit their highest mark since May 2019. The average contract interest rate on a 30-year fixed-rate mortgage with conforming loan balances ($647,200 or less) was 4.27 percent last week, up from 4.09 percent. Points rose to 0.44 from 0.54 (including origination fee) for loans with a 20 percent down payment.
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Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, pointed to the Federal Reserve’s expected rate increase and Russia’s invasion of Ukraine as reasons behind the nearly 1 full percentage rise year-over-year.
“Investors are weighing the impacts of rapidly increasing inflation in the U.S. and many other parts of the world against the potential for a slowdown in economic growth due to a renewed bout of supply-chain constraints,” Kan added.
The share of applications through the FHA remained the same from the previous week at 8.7 percent. The share of VA applications increased from 10.4 percent to 10.5 percent, while the USDA share of applications held steady as well at 0.5 percent.
Mortgage rates have largely shifted upwards this year. Around the same time last month, the mortgage rate was 4.06 percent. In the week ending on Feb. 18, mortgage applications dropped to their lowest level since December 2019.
In the first week of 2022, meanwhile, the average rate for a 30-year fixed-rate loan was 3.22 percent, which was the highest since May 2020 at the time; it’s now a full percentage point higher. In early 2021, the average rate was 2.65 percent.