The numbers: U.S. mortgage applications dipped in the latest week as mortgage rates stayed over 7%.

Rates are higher on the back of market expectations that the Federal Reserve will not cut its benchmark interest rate in March. 

The overall market composite index — a measure of mortgage application volume — fell in the last week, according to the Mortgage Bankers Association (MBA) said on Wednesday. 

The market index fell 5.6% to 171.5 for the week ending February 23 from a week ago. A year ago, the index stood at 187.6.

Key details: The purchase index — which measures mortgage applications for the purchase of a home — fell 4.5% from a week ago.

The refinance index fell 7.3%, as homeowners found little incentive to do so.

The average contract rate for the 30-year mortgage for homes sold for $766,550 or less was 7.04% for the week ending February 23. That’s down from 7.06% from the week before. 

The rate for jumbo loans, or the 30-year mortgage for homes sold for over $766,550, was 7.2%, up from 7.16% the previous week. 

The average rate for a 30-year mortgage backed by the Federal Housing Administration was down to 6.86% from 6.91%.

The 15-year rose to 6.7% from 6.61% from the previous week. 

The rate for adjustable-rate mortgages fell to 6.33% from last week’s 6.37%. 

Notably, there was a big divergence between mortgages originated for newly built homes and existing homes, the MBA noted. While purchase activity is overall running 12% behind last year’s pace, applications for newly built homes were up 19% compared to last year.

The big picture: The real-estate industry is concerned about how 7% mortgage rates could hurt sales. Existing-home sales fell to a 29-year low in 2023, due to elevated mortgage rates that went up to 8% in October.  

Home buyers on the other hand, are stuck between a rock and a hard place. On one hand, rising mortgage rates erode how much they can afford to buy, and that’s on top of the fact that home prices continue to rise.

Though a drop in rates would boost affordability, it would also invite more competition. And with the supply of homes for sales still low, potential bidding wars could drive up prices in turn.

What the MBA said: Noting the drastic difference between mortgage demand for new and resale homes, “this disparity continues to highlight how the lack of existing inventory is the primary constraint to increases in purchase volume,” Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, said in a statement.  

“However, mortgage rates above 7% sure don’t help,” he added.

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