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Mortgage demand in the United States has dropped to its lowest level in 27 years despite a recent drop in interest rates, according to a report by the Mortgage Bankers Association.
The MBA’s seasonally adjusted Market Composite Index, a measure of home loan applications, fell 11.1% from a week earlier, reaching its lowest level since December 1992.
The MBA attributed the decline in mortgage demand to an increase in the cost of mortgage insurance in the wake of the COVID-19 pandemic, the lack of available inventory in many markets, and rising property prices.
The government recently cut the benchmark interest rate for mortgage loans to a historic low of 2.25% in an effort to stimulate the economy and boost home sales. But the MBA said it was too early to assess the impact of the rate cut on mortgage demand.
Officials at the mortgage association said the recent fall in demand was in line with expectations given the current economic conditions.
The drop in mortgage demand could lead to difficulty in the housing market in the coming months as demand weakens and potential buyers struggle to get the financing necessary to purchase a home.