The numbers: Weaknesses in both purchases and refinance applications pushed the Market Composite Index, a measure of mortgage loan application volume, to its lowest level in 22 years, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index fell 6.5% to 288.4 in the week ending June 3. One year ago, the index stood at 645.4.
Key details: The Refinance Index dropped by 6% and was down 75% compared to a year ago.
The Purchase Index — which measures mortgage applications for the purchase of a home — fell by 7% from the previous week.
The big picture: The slowdown in the housing market is in full effect, thanks to the market pricing in a series of future rate hikes by the Federal Reserve.
Mortgage rates were “high enough” to “suppress refinance activity,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a statement.
Kan said the purchase market was suffering from “persistently low housing inventory” and the increase in rates over the last two months.
The housing market is becoming even more unaffordable, particularly for first-time buyers, Kan added.
Rates on mortgages have risen across the board, as a result of the Fed’s stated desire to continue hiking interest rates in an attempt to curb inflation in the U.S.
The 30-year fixed-rate mortgage averaged at 5.4% for the week ending June 3, up from 5.33% the week before, the MBA said.
The MBA also noted a drop in adjustable-rate mortgages, which comprise just 8.2% of total applications. The average rate on the ARM jumped from 4.46% to 4.51%.
Investors who trade Fed funds futures contracts expect the Fed to raise its benchmark rate to a range of 2.75%-3% by the end of the year, according to the CME Group’s FedWatch tool.
The Fed’s benchmark rate is currently in a range of 0.75%-1%.
Market reaction: The yield on the 10-year Treasury note
rose above 3% in early morning trading.