July 20 (UPI) — The U.S. demand for mortgages fell for a third straight week, hitting a 22-year low in what experts say is a clear signal that inflation and interest rates might now be sidelining many potential homebuyers.
The number of Americans who applied to buy a home fell 6.3% for the week ending July 15, according to The Mortgage Bankers Association’s most recent Market Composite Index figures, measuring volume of mortgage loan applications.
Applications to purchase a home fell 7%, and applications to refinance existing homes also took a hit, falling fell 4% over the course of the same week and dwindling 80% from a year ago.
“Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand,” MBA economist Joel Kan said in a news release.
“The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs.”
In recent months the Federal Reserve has raised its benchmark federal funds rate as a solution to rising inflation. The Fed is expected to further raise the benchmark rate at its July 26 meeting.
The Fed doesn’t directly set mortgage rates, and experts don’t expect a major impact in the short term.
“The prospect of the Fed front-loading their interest rate hikes and doing more sooner rather than later may actually help keep a lid on mortgage rates or even bring them down,” Greg McBride, Bankrate’s chief financial analyst, said, according to MarketWatch.
“But all of this depends on, and even assumes, that inflation peaks very soon. If not, all bets are off.”