This week’s chart looks at mortgage rates and how their sharp rise this year has led mortgage applications to drop to their lowest level since 1997.

Specifically, the top half of the chart shows the average rate for a 30-year fixed mortgage, going back to the early 2000s. It has absolutely skyrocketed this year; it reached nearly 7% last week, a two-decade high.

These higher rates are dragging down metrics that measure mortgage applications. On the bottom half of the chart, we have the Mortgage Bankers Association index of mortgage applications, which tracks the number of applications to purchase or refinance a home over time. It dropped 4.5% last week, its ninth drop in 10 weeks, and hovering around its lowest level in decades.

In other words, nobody wants to buy or refinance a home when mortgage rates are rising this fast this quickly. And these higher rates are putting a lot of pressure on the overall housing market; homebuilder sentiment has fallen every month this year, and existing-home sales are projected to drop for an eighth month.

Of course, all of this is to be expected with how aggressive the Fed has been with its tightening of monetary policy this year. The housing market is perhaps the most sensitive area of the economy to the Fed’s policies, so it’s no surprise that this is where we see the most considerable slowdown so far.

 

This is intended for informational purposes only and should not be used as the primary basis for an investment decision.  Consult an advisor for your personal situation.

Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.

Past performance does not guarantee future results.