U.S. mortgage applications plummet to near-30-year low

Aug. 23 (UPI) -- With lending rates topping 7%, the Mortgage Bankers Association said Wednesday that applications for a home loan hit the lowest level in nearly 30 years.

The MBA found that mortgage applications declined 4.2% week-on-week over the seven-day period ending Aug. 18. Joel Kan, the association's deputy chief economist, blamed the decline on rising interest rates.

The rate on a 30-year, fixed-term mortgage stands at 7.31%, the highest level since December 2000.

"Applications for home purchase mortgages dropped to their lowest level since April 1995, as homebuyers withdrew from the market due to the elevated rate environment and the erosion of purchasing power," he said. "Low housing supply is also keeping home prices high in many markets, adding to the affordability hurdles buyers are facing."

The housing market is on a dramatic decline. The National Association of Realtors said Tuesday that existing home sales are 16% below year-ago levels, which it blamed on the lack of available inventory and lending rates.

"Unfortunately, both have been unfavorable to buyers," the association's chief economist Lawrence Yun said.

The number of applications for an adjustable-rate mortgage, meanwhile, jumped to its highest level in five months.

"Some homebuyers are looking to lower their monthly payments by accepting some interest rate risk after the initial fixed period," Kan at the MBA added.

While inflationary pressures in the U.S. economy are easing, prices remain elevated relative to year-ago levels. The latest data show the shelter component of consumer-level inflation is up 7.7% relative to last year, compared to headline inflation of 3.2% over the 12-month period to July.

That leaves the broader market focus on this week's economic symposium at the Jackson Hole resort in Wyoming. Federal Reserve Chairman Jerome Powell could offer clues on the next move on lending rates when he addresses the forum on Friday.