Mortgage Applications Decline as Rates Hit ‘Highest Level Since January’: Report

Median monthly housing payments recently hit a record high of $2,882, dampening interest among many prospective homebuyers.

A “For Sale” sign is posted in front of a home in San Anselmo, Calif., on March 22, 2023. Justin Sullivan/Getty Images

Mortgage applications fell by 1.2 percent for the week ending May 23 from a week earlier amid elevated home loan rates, the Mortgage Bankers Association (MBA) said in a May 28 statement.

“Mortgage rates reached its highest level since January, following higher Treasury yields,” said MBA deputy chief economist Joel Kan. “Additional market volatility has added to the increase, keeping the mortgage-Treasury spread wider than it was earlier this year. The 30-year fixed rate increased to 6.98 percent, its third consecutive weekly increase.”

Due to higher rates, overall mortgage application activity fell, he said. Overall mortgage applications include applications to refinance properties as well as to buy homes.

The decline in overall applications was “driven by a 7 percent decline in refinance applications,” Kan added.

In contrast, mortgage applications to purchase homes were up over the past week and were higher compared to last year “as increased housing inventory in many markets has been supporting some transaction volume, despite the economic uncertainty.”

In a May 22 statement, Sam Khater, the chief economist at Freddie Mac, said that even though mortgage rates inched up, they continue to remain low compared to a year back.

And with more inventory on the market for buyers to choose from, “purchase application activity continues to hold up,” he said.

However, high housing costs pose a major challenge to any significant jump in buyer interest.

For the four weeks ending May 18, the median monthly housing payment hit a “record high” of $2,882, real estate brokerage Redfin said in a May 22 statement.

On the other side, a supply glut is building up as the total number of homes for sale jumped 14.3 percent on an annual basis to its “highest level in nearly five years,” it added.

Homeowners are getting more anxious regarding selling their homes, said Hazel Shakur, a Redfin Premier agent in Maryland.

“Clients are asking me to call them when we’re at a tipping point, because they want to sell before prices drop,” she said. “My advice to homeowners: if you’re planning to sell in the next year or two, do it now because we don’t know what’s going to happen with home values or the larger economy.”

“Buyers should know that because of the uncertainty in the air, they may be able to get a home for under asking price, or get concessions from the seller,” she said.

Affordability Crisis

Housing affordability has worsened massively since the pandemic, according to a May 15 report from the National Association of Realtors (NAR).

“U.S. households earning $75,000 a year can only afford 21.2 percent of home listings as of March 2025,” it said. This is far less than before the pandemic, when nearly 49 percent of listings were accessible to this demographic.

Things get tougher for households making $50,000 a year, as they can only afford 8.7 percent of the listed homes. This income group makes up a third of all households in America.

The situation only gets better for households earning $250,000 or more, as they have access to at least 80 percent of home listings.

The severe affordability crisis among low and moderate-income groups is taking place even though for-sale housing inventory in March was higher by 20 percent compared to a year ago.

“Shoppers see more homes for sale today than one year ago, and encouragingly, many of these homes have been added at moderate-income price points,” said Danielle Hale, chief economist at Realtor. “But as this report shows, we still don’t have an abundance of homes that are affordable to low- and moderate-income households.”

According to data from the National Association of Home Builders (NAHB)/Wells Fargo Cost of Housing Index, a family making the national median income of $104,200 had to shell out 36 percent of their income to cover the mortgage payment for a median-priced new home in the first quarter, the association said in a May 22 statement.

For lower-income families, affording the same home required them to pay 72 percent of their earnings towards mortgage payments.

The index “clearly shows the need for policymakers to take action to address the nation’s housing affordability crisis by enacting policies that will allow builders to increase the nation’s housing supply,” said NAHB Chairman Buddy Hughes.

“Eliminating burdensome regulations, ending tariffs on Canadian lumber and other building materials, providing funding to promote careers in the skilled trades, and expediting approvals for affordable projects will allow builders to construct more homes,” he said.