Mortgage Rates Climb, Buyer Demand Falls — Even As Housing Inventory Hits Multi-Year High

Mortgage demand slipped again last week as average 30-year loan costs jumped to 6.92%, the steepest level since February.

What Happened: Mortgage applications fell for a second straight week as borrowing costs climbed to a three-month high, the Mortgage Bankers Association said Wednesday. The group's Market Composite Index, a measure of total loan volume, dropped 5.1% on a seasonally adjusted basis for the week that ended on May 16.

The average contract rate for a 30-year fixed mortgage with balances up to $806,500 rose six basis points to 6.92%, the loftiest reading since mid-February and just shy of year-ago levels. Points edged up to 0.69 from 0.68 for loans requiring 20% down.

"Mortgage rates jumped to their highest level since February last week, with investors concerned about rising inflation and the impact of increasing deficits and debt," said Mike Fratantoni, MBA's SVP and Chief Economist.

See also: Trump’s DOGE Assigns Review Team To Examine NTSB Amid Firings And Safety Oversight Concerns

Refinance requests also declined 5% and were 27% above year-earlier levels, with few homeowners able to lock in meaningful savings now that mortgage rates hover near those of 2023.

Why It Matters: Spring normally brings a burst of sales, yet fresh listings are outrunning demand. Realtor.com data show new listings up 11.2% year-over-year, giving shoppers more choice even as monthly payments swell. Redfin reports national inventory has climbed to a five-year high, but high costs keep many buyers on the fence.

The surge in mortgage costs also tracks a broader bond-market sell-off spurred by Moody's recent U.S. credit downgrade and Congress' debate over a multitrillion-dollar tax-and-spending plan. Freddie Mac data show loans had stayed under 7% for 17 consecutive weeks before the latest breakout.

Read next: If You Invested $1,000 In Bitcoin When Dave Ramsey Called Fans Of The Crypto ‘Stupid,’ Here’s How Much You’d Have Today

Image via Shutterstock