Mortgage applications plummet due to rise in rates to July highs.

Mortgage rates increased for the fourth consecutive week, causing a further decline in already weak mortgage demand. As a result, total mortgage application volume decreased by 3.7% compared to the previous week, according to the Mortgage Bankers Association's seasonally adjusted index, after taking into account the New Year's holiday.

The interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 6.99% from 6.97%, while the points decreased to 0.68 from 0.72, including the origination fee, for loans with a 20% down payment.

The number of applications to refinance a home loan increased by 2% from the previous week, but was 6% lower than the same week one year ago. Despite this, rates are now 18 basis points higher than they were one year ago. However, the weekly gain in refinances is currently low, causing percentages to appear larger than usual due to the low volume.

The number of mortgage applications for purchasing homes decreased by 7% this week compared to the previous week, and was 15% lower than the same week last year. Despite the increase in the supply of homes for sale since January, higher interest rates and home prices are preventing buyers from making a purchase.

"Joel Kan, vice president and deputy chief economist at the MBA, stated that both conventional and government loan purchase applications were declined and slowed to their slowest pace since February 2024. However, refinance applications increased despite higher rates, but the increase was compared to recent low levels and was entirely driven by an increase in VA refinances, which continue to show weekly swings."

According to Mortgage News Daily, the 30-year fixed average mortgage rate increased to 7.14% this week, due to economic data.

MND's chief operating officer, Matthew Graham, noted that ISM Services' inflation component was one of the worst offenders, but higher job openings didn't help. The spike in yields was instantaneous but fairly well contained.

The Federal Reserve's meeting minutes and monthly employment report, both released on Wednesday and Friday respectively, will provide more economic data that will determine whether interest rates will continue to rise or change course for the new year.