Mortgage demand plummeted in mid March after a sharp increase in rates and inflation, the Mortage Brokers Association (MBA) reported.
The average rate for the 30-year fixed-rate mortgage surged to 4.27% from 4.09%, the highest since May 2019, the MBA announced Wednesday. Applications to refinance homes fell by 3% for the week, and they were down over 49% compared to the same week in March 2021.
Mortgage applications to buy a home increased 1% for the week, and they were 8% lower than the same week one year prior, the MBA reported.
“Mortgage rates continue to be volatile due to the significant uncertainty regarding Federal Reserve policy and the situation in Ukraine,” Joel Kan, vice president of economic and industrial forecasting at the MBA, said in the press release.
“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 said.
Home prices soared to a record high in 2021, increasing 18.8% on an annualized basis, according to the S&P CoreLogic Case-Schiller U.S. National Home Price Index. Home prices are so high that the average loan size in mid March was $453,200, the second-highest in the MBA’s survey.
Mortgage rates spiked in mid March, with investors anticipating the Federal Reserve’s announcement to hike rate after their Wednesday meeting, CNBC reported. Mortgage rates don’t follow the Fed’s funds rate, they are influenced by the central bank’s plan to taper its purchase of mortgage-backed bonds, which was used as a pandemic stimulus.
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