According to data from the Mortgage Bankers Association (MBA) issued on Wednesday, mortgage rates hit a 16-year high last week, significantly reducing demand among home purchasers.
In the final week of September, the 30-year fixed mortgage rate increased to 6.75%, the highest level since 2006. Mortgage rates have increased for seven weeks in a row, totaling a massive 1.3% increase.
Mortgage applications decreased by 14.2% from the previous week, reaching its lowest level since 1997, according to the MBA, as mortgage rates increased as a result of the Federal Reserve's ongoing interest rate increases.
Over the past year, mortgage rates have more than quadrupled, significantly increasing the cost of monthly payments.
“The steep increase in rates continued to halt refinance activity and is also impacting purchase applications, which have fallen 37 percent behind last year’s pace,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
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“There was also an impact from Hurricane Ian’s arrival in Florida last week, which prompted widespread closings and evacuations,” he added.
Potential buyers are being turned away from the mortgage market by high-interest rates and nearly record home prices. Home sales are declining nationwide after a prolonged housing boom during the COVID-19 pandemic.
Analysts, along with Fed Chair Jerome Powell, predict a steep decline in home prices in the near future.
Powell recently told reporters the U.S. housing market will likely “have to go through a correction” to bring prices down to attainable levels.
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