High mortgage rates chill US home-purchase applications – Orange County Register

(iStockphoto via Getty Images)

Mortgage applications for home purchases in the US slid last week by the most since early April as mortgage rates remained above 7%.

The Mortgage Bankers Association’s index of mortgage applications to buy a home decreased 4.4% in the week ended May 31, which included the Memorial Day holiday, according to data released Wednesday.

The contract rate on a 30-year fixed mortgage ticked up 2 basis points to 7.07%, marking the ninth straight week above 7%. The rate on a five-year adjustable mortgage, however, slumped 27 basis points to a two-month low of 6.37%.

The overall index of applications, which includes those for home purchases and refinancing, declined 5.2% last week to 180.4, the lowest since Feb. 23. The group’s refinancing measure dropped 6.8%.

While home listings have stabilized, prospective buyers are balking at high asking prices and borrowing costs. A National Association of Realtors gauge of contract signings on home resales dropped to a four-year low.

The MBA 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.

Quote-able

Orphe Divounguy, senior economist at Zillow Home Loans: “Personal consumption data last week suggested consumer spending is slowing down. At the same time, manufacturing activity pulled back after a brief rebound last month. Lastly, the most recent job openings data suggested that the labor market has loosened considerably. These are all signs the US economy is cooling and that inflation could slow.

“While investors expect that further disinflation will lead to Fed rate cuts later this year, a stronger than expected increase in hourly earnings in the May jobs report could cause some repricing activity.

“Expect more rate volatility ahead as the Fed and investors wait for more conclusive evidence of a return to low, stable and more predictable inflation.”