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Mortgage Demand Plummets to 1995 Lows as Interest Rates Spike to 8%

Mortgage demand has unexpectedly dropped to its lowest level since 1995, and the cause has been revealed as being a combination of low interest rates and rising prices in the housing market. According to a new report from the Mortgage Bankers Association (MBA), total mortgage application volume fell 10.6 percent in June from the previous month, a larger than expected drop. This decline in activity was driven mostly by refinancings, which declined to their lowest level in over 20 years. The main reason for this dramatic drop in mortgage demand is the rise in mortgage rates, which have been steadily increasing since March. The average interest rate on a 30-year fixed-rate mortgage was 7.9 percent in June, up from 4.5 percent in March. At the same time, the housing market continues to experience record high prices due to increases in construction costs and strong competition among buyers. This has made it more difficult for prospective homeowners to afford a mortgage, especially with rates so high. The combination of these two factors, high mortgage interest rates and a continued upward pressure on home prices, has led to the lowest level of mortgage demand in over two decades. The good news, however, is that the MBA expects mortgage rates to decline in the near future. This could help to stimulate activity in the housing market. Additionally, as interest rates fall, more people will likely be able to qualify for a home loan, which could increase demand in the housing market and help to boost mortgage application activity. Overall, the drop in mortgage demand is an alarming sign for the housing market. It is likely that homeowners and buyers will have to continue to struggle until mortgage rates fall back to more manageable levels and the price of homes starts to become more affordable.