Mortgage demand slides 29% from a year ago as rates shoot up to a 14-year high

• US mortgage demand has slumped by nearly a third over the past year, the Mortgage Bankers Association said Wednesday.
• Its weekly survey showed demand has dropped as the 30-year fixed-rate mortgage topped 6% for the first time since 2008.

Demand for US mortgages has dropped by nearly a third over the past year as a key interest rate topped 6% for the first time in more than a decade, according to an industry report released Wednesday.

Mortgage purchase applications in the week ended September 9 were down 29% from the same period in 2021, the Mortgage Bankers Association said in a weekly update that adjusted for the observance of Labor Day.

The group's survey also showed weekly total loan application volume declined by 1.2%. The MBA's Refinance Index fell 4% from a week ago and was lower by 83% from the same time last year.

The moves were logged as the 30-year fixed mortgage rate rose to 6.01%, reaching the 6% mark for the first time since 2008, or essentially double what the rate was a year ago, the report said.

"Rising mortgage rates and elevated home prices continue to have a huge impact on affordability and home buyer confidence levels, and we expect to see home prices begin to fall on a national basis in July/August," Scott Buchta, head of fixed-income strategy at Brean Capital, in a note Wednesday.

Mortgage rates have been following advances in Treasury yields this year, with the Federal Reserve ramping up interest rates to slash high inflation by slowing economic activity. The benchmark 10-year Treasury yield was around 3.41% on Thursday compared with 1.51% at the end of 2021.

"Higher mortgage rates … have contributed to more homebuyers staying on the sidelines," Joel Kan, MBA's associate vice president of economic and industry forecasting, said in the update.

But he added that government loans, which first-time buyers tend to favor, bucked the trend of declines and increased over the week, driven mainly by lending activity through the Veterans Affairs Department and the Agriculture Department.