Interest rates continue to rise and mortgage application activity continues to fall.  This continuing pattern seems to be the theme for the housing industry this year.  Interest rates keep going up, which scares away many potential home buyers. 

U.S. mortgage applications fell last week as interest rates hit their highest in over four years, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended June 23 decreased 6.7 percent to 529.6 from the previous week’s 567.6.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.86 percent, up 0.13 percentage point from the previous week, its highest level since April 12, 2002 when it reached 6.92 percent.

The rising interest rates causing the housing industry to suffer isn’t a new occurrence.  Anytime rates go up, activity can be expected to go down.  However, the way interest rates seem to control the housing market is a viscous cycle.  The industry will boom one year which is usually followed by the lowing of interest rates and more booming; however, this surge of business has to come to an end.  At this point, most people who were in the market for a new home have already purchased one.  So now the boom is over, nobody is buying homes, and the interest rates start rising, which only adds to the poor business.  This is why I say “beware of the boom.”  A booming market may seem great, but it is usually followed by some tough times with higher interest rates.

By James Nexus


Compare Your Loans Contributing Editor