Credello: Mortgage Demand Has Dropped and Here's Why
NEW YORK, June 14, 2023 (Newswire.com) - Credello: In the ever-fluctuating world of real estate, mortgage demand is a crucial indicator of the health of the housing market. Recent data shows a significant drop in mortgage demand, leaving many wondering what factors contribute to this downward trend. Let's explore the reasons behind the decline in mortgage demand.
The decrease in mortgage demand
According to a recent report by CNBC, applications for a mortgage to purchase a home dropped 3% for the week, and a staggering 31% lower than the same week one year ago. The alarming statistics highlight a noteworthy shift in the housing market dynamics.
One of the primary factors contributing to this decline is the recent increase in the average contract interest rate for 30-year fixed-rate mortgages. The average interest rate climbed to 6.91% in just one week from 6.69%, adding significant financial pressure on potential homebuyers. As interest rates rise, borrowing becomes more expensive, making it less affordable for individuals to purchase homes. This increase in interest rates has undoubtedly played a significant role in the drop in mortgage demand.
Understanding the mortgage process
To better understand the impact of this decline, it's important to clarify two key terms. What is a soft credit inquiry? This occurs when a lender or creditor checks your credit report without explicit permission. It is typically done for informational purposes and does not impact your credit score. On the other hand, a hard credit inquiry is performed with your consent and can affect your credit score.
Prequalification is an initial step in the mortgage application process that helps potential homebuyers assess their eligibility and determine the loan amount they may qualify for. Does prequalification affect your credit score? Contrary to popular belief, prequalification does not require a hard credit inquiry and therefore does not affect your credit score. This allows homebuyers to explore their options without worrying about negative credit consequences.
Now, let's address the impact of prequalification on credit scores. Since prequalification involves a soft credit inquiry, it does not leave any lasting negative effect on your credit history. As a result, individuals can confidently approach lenders and explore various mortgage options without the fear of damaging their credit scores. Prequalification provides a valuable opportunity for potential homebuyers to gain insight into their financial standing and plan their future homeownership journey accordingly.
Bottom line
The recent drop in mortgage demand can be attributed to several factors, most notably the increase in average contract interest rates for 30-year fixed-rate mortgages. This rise in rates has made it more difficult for prospective homebuyers to afford the cost of borrowing, resulting in a decline in mortgage applications.
About Credello
Credello is a financial tech company offering a personal finance tool that simplifies financial decisions through personalized, on-demand recommendations — so users can borrow, save, or invest with confidence. Credello believes that finding the right financial product should be as easy and interactive as online shopping, and we are on a mission to make that possible. For more information, please visit https://www.credello.com.
Source: Credello
