Mortgage Applications Drop to 28-Year Low as Rates Rise, Slowing Spring Home Buying Season

The spring housing market is off to a slow start as mortgage rates continue to rise, according to the Mortgage Bankers Association. Applications for mortgages fell for the third week in a row and are now at a 28-year low.

Applications for a mortgage dropped 5.7% for the week ending February 24 from the week prior. Applications for the purchase of a home were down 6% last week compared with the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.71% from 6.62%, with points increasing to 0.77 from 0.75 (including the origination fee) for loans with a 20% down payment.

The decrease in mortgage applications is a stark contrast to the brief revival in application activity in January when mortgage rates dropped. Refinances are more than 70% down from last year, as a majority of homeowners have already locked in rates lower than those currently available.

The rise in mortgage rates has caused home buyers to pull back, even as the spring home buying season should be heating up. The Mortgage Bankers Association noted that the decrease in mortgage applications is a sign that the housing market is still struggling to recover from the pandemic.

“The housing market is still trying to find its footing as the pandemic continues to impact the economy,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The increase in mortgage rates over the past month has caused some buyers to pull back, and the market is still trying to adjust to the new normal.”