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Mortgage demand is falling to a 27-year low despite a drop in interest rates, according to the Mortgage Bankers Association’s most recent weekly survey. The news, which casts a new light on the current housing market, comes at a time when the Fed has been cutting benchmark rates to historic lows in an effort to jump start the nation’s economy.
Demand for mortgage loans declined for the sixth consecutive week, falling by 3.1 percent in the week ending April 3. The seasonally adjusted index for mortgage applications, which measures both purchase and refinancing activity, reached its lowest level since September 1992. This indicates that buyers are not taking advantage of the lower borrowing costs despite stimulus efforts.
The news could be an indication that the housing market is beginning to level off from the plunge that it took after the pandemic began. With unemployment at record highs, and stimulus checks not going out quickly enough, potential buyers simply may not have the funds or resources to take advantage of the market. Rising home prices could also be a factor, as fewer people may be able to afford the additional cost.
The news is also cause for concern, as lower-than-expected mortgage demand can mean less money is flowing into the economy, which could further delay the economic recovery.
It remains to be seen how the market will respond as the pandemic winds down and the economy begins to recover. In the meantime, it is important to keep an eye on mortgage demand as it may provide important clues about the future of the economy.
