PHOTO: Mortgage applications have tumbled as interest rates have risen. SAUL LOEB/Getty Images
US mortgage applications are in “meltdown” as borrowing costs shoot upwards, and the threat to house prices is growing, according to the consultancy Pantheon Macroeconomics.
The Mortgage Bankers Association said Wednesday that applications for new purchases tumbled again in the week to June 3, continuing a months-long downtrend.
The MBA’s index which measures applications for new purchases tumbled to 208.2 from 224.1 a week earlier, according to Bloomberg data. It has dropped by more than a third since January, when it stood above 310.
“In the three months to May, applications fell at a 52% annualized rate, compared to the previous three months,” Pantheon’s chief economist Ian Shepherdson said in a note earlier this week.
“A meltdown, in other words.”
Americans are applying for far fewer mortgages now that interest rates are rising as thetries to tackle surging inflation. Meanwhile house prices have remained sky-high, making a new home unaffordable for many.
The average 30-year fixed-rate mortgage hit a 13-year high of 5.53% at the start of May. The rate has since cooled to 5.4% as bond yields — which set the tone for mortgages — have fallen slightly.
Shepherdson said the sharp drop in applications is likely to continue, given that interest rates are set to rise further, and poses a risk to US house prices.
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