Mortgage demand falls to 27-year low despite drop in interest rates
The demand for mortgages has dropped to a 27-year low despite the recent drop in interest rates, according to the Mortgage Bankers Association. The MBA’s index of mortgage application activity fell 16.2% last week, representing the lowest reading since the survey began in 1990.
The slump in mortgage demand could suggest that home buyers are unsure about the market or worried about their job prospects. The decline could also be due to potential home buyers being unable to put together enough money for a down payment as lenders impose stricter borrowing requirements in the wake of the coronavirus pandemic.
In addition, average rates on 30-year fixed rate mortgages fell to 3.05%, which is the lowest rate ever recorded by Freddie Mac. Low interest rates usually lead to an increase in mortgage applications, but consumers appear to be hesitant to take on new debt even with rates at all-time lows.
The weak demand is likely to have ripple effects in the housing industry. Fewer mortgage applications puts downward pressure on prices, as well as reducing job opportunities in the real estate sector.
The mortgage market is likely to remain weak in the weeks and months to come as buyers remain jittery and the economic outlook remains uncertain.