The average interest rate on the most popular U.S. home loan climbed to its highest level since the 2008 financial crisis and purchase applications were down more than 15% from last year, Mortgage Bankers Association (MBA) data showed on Wednesday.
Still, more homebuyers sought properties compared to a week earlier, perhaps signalling a flurry of activity before aggressive tightening by the Federal Reserve further impacts the sector.
Fed policymakers later on Wednesday are expected to raise interest rates by 75 basis points in order to quell inflation running at a more than 40-year high. The abrupt move, following a worse-than-expected key inflation reading last Friday, would be the biggest U.S. interest-rate hike in decades.
Expectations for Fed tightening have led to a surge in Treasury yields. The yield on the 10-year note acts as a benchmark for mortgage rates.
The average contract rate on a 30-year fixed-rate mortgage rose by 25 basis points to 5.65% for the week ended June 10, the highest level since late 2008, towards the end of the financial crisis and Great Recession.
The MBA said its Purchase Composite Index, a measure of all mortgage loan applications for purchase of a single family home, increased 8.1% from a week earlier and its Refinance Index rose 3.7%.
But purchase applications were down more then 15% compared to last year as ongoing record-low housing stock and a lack of affordability alongside the run up in interest rates have impacted demand.
(Reporting by Lindsay Dunsmuir; Editing by Simon Cameron-Moore)