Mortgage applications hit 4-year low as interest rates rise

Potential buyers are backing off because of high rates and low inventory

(Credit: iStock)
(Credit: iStock)

Rising interest rates are pushing mortgage applications to four-year lows.

The Mortgage Banker Association’s market composite index, a measure of loan application volume, fell 4 percent last week to its lowest point since December 2014, according to Bloomberg. The drop correlates with rise in the contract rate on a 30-year fixed loan from 5.11 percent to 5.15 percent last week.

Sign Up for the undefined Newsletter

Together with strong pricing for housing around the country and a scarcity of listings, homebuyers are feeling the pressure. In some areas, high mortgage prices and low inventory are dragging down on the market.

The slowdown has prompted some lenders to shrink their mortgage divisions — Wells Fargo laid off 600 workers in August and JPMorgan laid off 400 employees nationwide last month.

Mortgage rates and commercial borrowing costs are expected to keep climbing. Federal Reserve Chairman Jerome Powell has been raising the benchmark borrowing rate to curb inflation and steady an expanding economy. Another hike is expected in December. [Bloomberg] – Dennis Lynch