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The demand for mortgages in the United States fell to its lowest level since 1995 in May of this year, as interest rates climbed close to 8%. This drop in mortgage demand follows a pattern seen in the early 1980s and is largely attributed to rising interest rates.
With the increase in rates, households are less likely to apply for mortgages, as monthly payments become more expensive. Additionally, borrowers may also be deterred by higher closing costs, which magnify the effects of rising rates.
The drop in mortgage demand has been most pronounced in the higher-priced home market. These properties are now less affordable due to rising rates, and so demand has dipped significantly.
However, this trend is likely to turn around in the near future. Lower mortgage rates are expected later this year and into the next, which should restore demand to previous levels. As long as the economy continues to show signs of strength, it is possible that the demand for mortgages could begin to rebound.