U.S. mortgage rates climbed to their highest level in almost three years last week, adding pressure to a housing market already strained by affordability problems.
The average contract rate for a conforming 30-year fixed mortgage rose 19 basis points to 7.49% in the week ended Oct. 2, from 7.30% a week earlier, the Mortgage Bankers Association reported. Points increased to 0.84 from 0.75 for loans with an 80% loan-to-value ratio. The rate was last higher in November 2023, Reuters reported.
Rate readings vary by survey and timing. A separate daily gauge from Mortgage News Daily put the 30-year fixed rate at 7.59% on Oct. 7, up 0.03 percentage point from the previous day and 1.21 points from a year earlier.
Borrowing demand falls
Mortgage applications fell 4.2% from the prior week, according to the MBA survey. Refinancing applications dropped 8% and were 56% below the same week a year earlier. Purchase applications fell 2% for the week and were 15% lower than a year earlier.
Borrowers are also showing more interest in loans with adjustable rates, which can offer lower initial payments. Adjustable-rate mortgages accounted for 10.3% of total application activity, unchanged from the prior week.
Joel Kan, the MBA’s deputy chief economist, said few homeowners had an incentive to refinance at these rates and that higher borrowing costs were causing potential buyers to step back.
