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Interest rates reach 21-year high as mortgage demand drops

U.S. mortgage rates rose to their highest level in 21 years this week, as demand for mortgages decreased.

According to data released Thursday, in the week ending August 17, the 30-year fixed-rate mortgage averaged 7.09% — up from 6.96% the week before (one year ago, the 30-year fixed-rate was 5.13%). The last time rates were over 7% was in November of last year, when they hit 7.08%. This week’s average rate is the highest the 30-year, fixed-rate mortgage has been since April 2002, when it was 7.13%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.16% from 7.09%, with points decreasing to 0.68 from 0.70 (including the origination fee) for loans with a 20% down payment. That was the third straight weekly increase and the highest level since October 2022, which also matches a high level seen in 2001.

As a result, mortgage demand from homebuyers was 26% lower than the same week one year ago. Applications to refinance a home loan fell 2% for the week and were 35% lower than the same week one year ago. Last year the 30-year fixed was 5.45%, but the year before it was in the 3% range.

On the flip side, applications for a mortgage to purchase a newly built home are rising. According to a separate MBA report released Tuesday, applications are up 35.5% in July, with the Federal Housing Administration sharing that those applications hit the highest level since May 2020. FHA loans offer low down payment options and are popular with first-time homebuyers.

Editorial credit: Aleksandrkozak / Shutterstock.com

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