Following a substantial rise in the interest rate on FHA loans, mortgage demand witnesses another decline, reaching its lowest point in 21 years.

Mortgage interest rates experienced a significant increase last week, including the rate on the government’s low down payment option reaching its highest level in 21 years. As a result, mortgage demand declined, with total applications dropping by 3.1% compared to the previous week, according to the Mortgage Bankers Association. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances also rose, going from 6.93% to 7.09%, with points increasing from 0.68 to 0.70. Additionally, the rate for jumbo loans reached 7.04%, while the rate on Federal Housing Administration loans hit 7.02%. The increase in rates is attributed to a rise in Treasury yields due to the Treasury’s funding announcement and the downgrading of the U.S. government debt rating. Consequently, both applications for home purchases and refinancing experienced declines compared to the same week last year. High mortgage rates are making it more difficult for individuals to afford homes and are keeping current homeowners from moving, as they are reluctant to pay higher rates on a new property. Mortgage rates have continued to remain over 7% this week, and there may be a significant change on Thursday following the release of monthly inflation data.