Mortgage demand drops despite rates coming off recent highs

Mortgage rates fell back from their recent highs, but demand dropped for the fourth straight week.

Total mortgage application volume declined 1.4% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.81% from 6.91%, with points falling to 0.66 from 0.83 (including the origination fee) for loans with a 20% down payment. That was still, however, the second-highest weekly average rate of 2023 to date.

Applications to refinance a home loan fell 1% for the week and were 42% lower than the same week a year ago. The refinance share of mortgage activity increased to 27.3% of total applications from 26.7% the previous week.

Applications for a mortgage to purchase a home slipped 2% for the week and were 27% lower than a year ago.

“Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers,” said Joel Kan, MBA’s deputy chief economist. “There was less of a decline in government purchase applications last week, which was consistent with a growing share of first-time home buyers in the market.”

Mortgage rates have not moved much this week, as there has been little economic data to push them in either direction. Next week’s monthly inflation report from the government will likely be the next major read on the economy to influence mortgage rates.