Mortgage applications drop 30% below year-ago levels

June 7 (UPI) -- Though mortgage rates declined from week-ago levels, total applications are still about 30% lower than they were at this time last year as borrowing remains prohibitive, the Mortgage Bankers Association said Wednesday.

The MBA put the average rate of a 30-year, fixed-term mortgage at 6.81% for the week ending June 2, down 10 basis points, or 0.1%, from the prior week. The data are somewhat skewed by the long Memorial Day holiday weekend.

Nevertheless, Joel Kan, the deputy chief economist at the MBA, said the total number of applications has been on a decline over the last four weeks.

"Overall applications were more than 30% lower than a year ago, as borrowers continue to grapple with the higher rate environment," he said. "Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers."

Lending rates are sharply higher than year-ago levels because of policy decisions at the Federal Reserve designed to lower consumer-level inflation. The Fed has imposed successive rates over the last year, though at around 4% annually, inflation is about 2% above its target rate.

Michelle Bowman, a governor at the Fed, said last week that availability and affordability of U.S. housing is critical, though the housing market is seeing a real impact from higher interest rates. But, like the labor market, she felt there was some resilience in housing that would complicate the fight against inflation.

"While we expect lower rents will eventually be reflected in inflation data as new leases make their way into the calculations, the residential real estate market appears to be rebounding, with home prices leveling out recently, which has implications for our fight to lower inflation," she said.

The Fed meets next week to consider its next move in the fight against inflation.