America’s property freeze: Mortgage demand falls to lowest level since 1996 as high interest rates deter home movers

Mortgage applications have fallen to their lowest level since 1996 as higher interest rates take their toll on buyers.

Data from the Mortgage Bankers Association (MBA) shows that demand for new loans was 27 percent lower last week than the same period last year.

It comes as home loan interest rates hover around 7.12 percent, which discourages owners from moving. A separate analysis from the Atlanta Fed also recently found that homebuyers faced the least affordable market since 2006.

MBA economist Joel Kan said: ‘Mortgage applications fell for the seventh time in eight weeks, reaching the lowest level since 1996.

“Given the high interest rates at the moment, there is still minimal refinancing activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate.”

The real estate market has essentially reached an impasse as most homebuyers locked in their mortgage rates when they were still between 2 and 3 percent.

However, interest rates have more than doubled since then, with the average deal on a 30-year mortgage now standing at 7.27 percent, according to the MBA.

Borrowing has been driven up by the Federal Reserve’s aggressive campaign to raise interest rates to a 22-year high to curb rampant inflation.

It means a homeowner with a $400,000 home now has to pay a monthly mortgage payment of $2,597.

But if they had adjusted this in September 2021 – when rates were around 3 percent – ​​their monthly payments would have been almost $1,000 cheaper at $1,602.

It has created a ‘lock-in’ effect with households refusing to move to avoid higher mortgages – limiting the country’s already limited supply of housing and keeping prices high.

A recent Freddie Mac survey found that 82 percent of real estate buyers felt “trapped” in their property. And one in seven homeowners who have no intention of selling their home cited the current low rate as the main reason for staying put.

According to figures from the MBA, demand for refinancing loans also fell by 5 percent last week, compared to the week before. It represented a decrease of 31 percent compared to the previous year.

The figures come after a leading Wall Street economist said U.S. home prices were being kept high by an aging population in a research note titled “Blame the Boomers.”

Barclays economist Jonathan Millar said the problem is being exacerbated by the number of baby boomers (aged 57 to 75) who are forming new households due to retirement, divorce or the death of a spouse. Millar added that this puts pressure on the already limited housing supply, keeping prices high.

He wrote: “The US housing sector is on the rise again, even as mortgage rates are at their highest levels in decades.

‘While much has been attributed to shortages of existing properties and mortgage lock-in effects, we believe the strong demand is a symptom of an aging population.’