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Applications for home purchase mortgages dropped to their lowest level since April 1995 for the week ending Aug. 18, reports Joel Kan, Mortgage Bankers Association’s (MBA) vice president and deputy chief economist, in the latest Weekly Mortgage Applications Survey.

The Market Composite Index, a measure of mortgage loan application volume, decreased 4.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index decreased 6% compared with the previous week.

“Treasury yields continued to spike last week as markets grappled with illiquidity and concerns that the resilient economy will keep inflation stubbornly high. This spike pushed mortgage rates higher last week, with the 30-year fixed rate increasing to 7.31%—the highest level since December 2000,” says Kan. “Home buyers withdrew from the market due to the elevated rate environment and the erosion of purchasing power. Low housing supply is also keeping home prices high in many markets, adding to the affordability hurdles buyers are facing.”

The Refinance Index decreased 3% from the previous week and was 35% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 5% from one week earlier, and the unadjusted Purchase Index decreased 7% compared with the previous week and was 30% lower than the same week one year ago.

The refinance share of mortgage activity increased to 29.5% of total applications from 28.6% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.6% of total applications.

“The ARM share of applications increased to 7.6%, the highest level in five months, and the number of ARM applications picked up by 4% last week,” adds Kan. “Some home buyers are looking to lower their monthly payments by accepting some interest rate risk after the initial fixed period.”

The FHA share of total applications increased to 14.3% from 13.8% the week prior. The VA share of total applications decreased to 11.6% from 11.8% the week prior. The USDA share of total applications increased to 0.5% from 0.4%.