Mortgage demand in the U.S. fell for the second consecutive week as higher interest rates dampened homebuying and refinancing activity. According to the Mortgage Bankers Association (MBA), total mortgage application volumes dropped 10.5% for the week ending March 20. The decline follows a rise in mortgage rates, which reached 6.43% for 30-year fixed-rate loans, the highest level since October 2023.
Refinancing demand plummeted 15%, though it remains 52% higher than the same week last year when rates were slightly higher. The refinance share of mortgage activity decreased to 49.6%, down from 60% in mid-January. Meanwhile, applications for home purchases fell 5% week-over-week and were only 5% higher than the same period last year.
Market Factors and Economic Context
The rise in mortgage rates was attributed to elevated Treasury yields, influenced by geopolitical tensions and economic uncertainty. Joel Kan, MBA's vice president and deputy chief economist, noted that the 30-year fixed rate increased by 30 basis points from the end of February, reaching its highest level since October 2023. The threat of prolonged higher oil prices also contributed to market volatility.
Broader Implications
The decline in mortgage demand reflects broader economic trends, including inflation concerns and Federal Reserve policies. While refinancing activity remains strong compared to last year, the recent drop suggests a cooling in the housing market. Analysts suggest that sustained high rates could further reduce demand, potentially impacting home prices and construction activity.