Significant decline in US mortgage loan applications (Getty)
with persistence high interest rates America, the demand for loans decreased Mortgage to its lowest level in 25 years, while expectations indicate a continuation of the decline during the remainder of this year, at least.
After four months of continuous declines, last week recorded the lowest level of demand for mortgage loans since 1997, following the stability of the rate of return on US Treasury bonds for ten years, the most influential in the pricing of real estate loans, above level 4% is important.
Today, Wednesday, the Mortgage Bankers Association confirmed a decline in demand for these loans during the week ending by 4% compared to the previous week, and by 38% compared to the same week last year.
The union also indicated that requests for refinancing, which are usually accepted by millions of Americans to obtain a quick loan once morest their real estate, decreased during the week by 7%, while the decline compared to the same week last year amounted to 86%.
And all types of interest, including those applied to mortgage loans, rose with the successive increase of the Federal Reserve to the interest rate on its funds, during the last seven months, to a range of 3% – 3.25%, following it was at 0% – 0.25% in March / last March.
The Federal Reserve seeks, through raising interest rates and other tightening policies, to return the US inflation rate to its target level of 2%, while it is currently exceeding 8%, approaching its highest level in more than forty years.
The average fixed interest rate applied to 30-year mortgage loans rose to 6.94% from 6.81% last week, with an average loan amount approaching $650,000, and a down payment representing 20% of its value. This is the highest rate in the country since 2002, according to the Federation index.
“The speed and level at which interest rates have risen this year has significantly reduced refinancing activity and exacerbated the current affordability challenges in the real estate market,” said Joel Kahn, the union’s economist. “Residential real estate activity, which includes the issuance of new home permits, as well as home sales, has been on a downward trend in conjunction with higher interest rates.”
The high interest rates, with expectations of their reduction, starting from the middle or end of next year, prompted the largest number of buyers to prefer variable interest contracts, to take advantage of their decline in the coming years.
According to union data, variable-interest contracts increased to 12.8% of the total signed contracts, the highest percentage since the first quarter of 2008, which witnessed the height of the mortgage crisis in the United States, and then the global financial crisis that ensued.