U.S. mortgage rates are hitting multi-decade highs at the same time that mortgage applications are sinking to multi-decade lows.
The popular 30-year fixed mortgage contract hit 7.72% on Tuesday. In comparison, the contract on a 15-year fixed mortgage hit 6.86%, marking the highest mortgage rates since 2000, according to historical data compiled by Mortgage News Daily.
While mortgage rates continue to rise in the United States, mortgage applications saw their sharpest decline since April and the lowest reading since the mid-1990s, Mortgage Bankers Association (MBA) data shows.
“Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields,” said Joel Kan, vice president and deputy chief economist at MBA.
“Rates for all mortgage products increased, with the 30-year fixed mortgage rate increasing for the fourth consecutive week to 7.53 percent — the highest rate since 2000. As a result, mortgage applications grounded to a halt, dropping to the lowest level since 1996,” he explained in an October 4 news release covering the MBA’s weekly survey results.
Overall, the U.S. housing market continues to bear the brunt of the Federal Reserve’s aggressive monetary policy stance, as many existing homeowners are trapped with golden handcuffs — unwilling to sell their property over fears of being stuck with a higher rate on their next home.
The MBA noted that many potential homebuyers are practicing caution and holding off on signing a mortgage contract until rates cool off a bit. According to the MBA, the rapid rise in rates has pushed an increasing number of potential homebuyers out of the market, leading to the lowest level of purchase activity since 1995.
With the Fed’s latest economic projections pointing to rate cuts in late 2024, it is unlikely that mortgage rates in the United States will soften anytime soon. This ultimately leaves the U.S. housing market in a dilemma where buyers and sellers feel paralyzed.
The MBA survey covers over 75% of all U.S. residential mortgage applications and has been conducted every week since 1990.