Mortgage Rates Hit 23-Year High, Discouraging Homebuyers

The last time mortgage rates were this high, Bill Clinton was president, gas was under $1.50 and the Yankees were good.

Seasonally adjusted mortgage rate applications fell 5 percent week-over-week as rates for a 30-year fixed mortgage hit 7.31 percent, the highest level since December 2000, according to the Mortgage Bankers Association. The index was 30 percent lower last week than a year ago.

“Treasury yields continued to spike last week as markets grappled with illiquidity and concerns that the resilient economy will keep inflation stubbornly high,” said Joel Kan, MBA vice president and deputy chief economist, in a statement.

Applications for home purchase mortgages have not been this low since April 1995, as mortgage rates have eroded buyers’ purchasing power, he said. Normally, sellers would lower prices to compensate, but a low supply of for-sale homes is keeping prices high in many markets.

Applications for one type of home loan — adjustable rate mortgages — did buck the trend, rising by 4 percent from the week before. The share of such applications climbed to 7.6 percent of the market, a five month high.

Refinancing requests accounted for 29.5 percent of home-loan applications last week, up from 28.6 percent the week prior.

Rising mortgage rates depresses sales activity — a problem for residential brokerages for the past year. But several enjoyed good results in the second quarter, which included the spring selling season. That might not continue if rates remain high or continue to increase.

Lawrence Yun, chief economist at the National Association of Realtors, last year predicted rates could rise as high as 8.5 percent. Other observers expect them to ebb later this year.

The Mortgage Bankers Association’s weekly survey covers more than 75 percent of all retail residential mortgage applications in the U.S.