Mortgage demand has declined in the U.S. according to the Mortgage Bankers Association (MBA). Meanwhile, inflation has remained persistently high. The drop in demand was driven by a decrease in purchase applications and refinance applications. Fixed-rate mortgages were the primary culprits behind this gradual shift in mortgage demand, while adjustable-rate products were on the rise. The MBA believed that market uncertainty was keeping consumers from committing to large financial decisions.

The decrease in demand was a result of rising inflation rates, which has caused mortgage interest rates to increase. As a result, the affordability for potential homeowners has decreased, prompting them to put off committing to a home purchase. Additionally, existing owners have opted to look at non-refinance options due to the uncertainty in the economy. This is especially true for those with a lower credit score in order to avoid potential added costs from higher interest rates.

The rise in adjustable-rate mortgages is largely due to the decrease in costs associated with a more uncertain market. Consumers are opting for ARM loans due to their low introductory rates and the added flexibility in payment terms. Additionally, some lenders have added programs that offer incentives or discounts for those researching ARM loans. Although ARM loans require higher interest rates over the long term, they are a viable option for consumers wishing to take advantage of low interest rates.

In conclusion, mortgage demand has decreased due to persistently high inflation, while adjustable-rate products have become more popular due to their low introductory rates and added flexibility. Furthermore, uncertain economic conditions are prompting potential homeowner to watch their finances more carefully. The MBA believes that this market uncertainty, along with rising inflation, will eventually be replaced by a period of economic expansion later in the year. As the market continues to evolve, borrowers will be keeping an eye on the best way to buy or refinance a home.

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