Higher mortgage rates are beginning to bear their bitter economic fruit.
Fewer Americans applied for mortgages last week, an industry group said on Wednesday, as the highest borrowing rates in more than three months cut demand for refinancing.The MBA Market Composite Index now stands at 1284.3, down from its high of 1856.7 the week ending May 30. That makes a remarkable 31% drop in the index over the past six weeks. Refinancing as a percentage of total mortgage applications dropped for the fifth week in a row, and the average contract interest rate for 30-year fixed-rate mortgages is now up to 5.72%, the highest since early April.
Applications for home loans fell 5.4 percent last week to the lowest level since early May, the Mortgage Bankers Association of America said on Wednesday.
The housing and mortgage sectors have been crucial props for the economy for over two years. By some estimates, about half the growth in the economy for the last year has come from housing and home loans.
But with rates rising, housing will likely slow, economists said.
Pollyannaish economists are already trotting out the lyrics from "Sunshine Day": "Business spending is likely to increase" and "On the consumer side, with tax refunds coming to Americans, spending should hold steady".
The main pillar of the US economy for the past two years is done bearing its undue share of the weight.