US mortgage applications for home purchases fell for a fourth week as 30-year fixed rates held close to an almost seven-month high.
The Mortgage Bankers Association index of applications for home purchases dropped 1.7% in the week ended June 2 to 151.7, the second-lowest level since 1995. The contract rate on a 30-year fixed mortgage decreased 10 basis points to 6.81%, according to the data out Wednesday.
The five-year adjustable-rate mortgage surged 54 basis points to 5.93%, the highest in MBA data back to 2011.
“Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers,” Joel Kan, MBA deputy chief economist, said in a statement.
Mortgage rates had been climbing in recent weeks, offering potential homebuyers little incentive to apply for new mortgages. While the latest pullback in borrowing costs is welcome, rates remain elevated. That’s not only weighing on housing affordability more generally but also deterring many potential sellers from listing their homes.
“Affordability still looks badly stretched by past standards, which will continue to weigh on mortgage demand in the coming months,” Sam Hall, property economist at Capital Economics, said in a note to clients. “Buyers will also face headwinds from a weakening economy, so we doubt demand will rise far from its current level over the rest of this year.”
Figures can be difficult to seasonally adjust around holidays and the latest data cover the period that included Memorial Day.
Refinancing activity edged lower, the MBA report showed. The overall measure of mortgage applications fell 1.4%.
The survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.
(Adds graphic, MBA comment)
