Fixed mortgage lending fell in June as the housing market suffered a widespread downturn, according to a new report.
Mortgage Capital Trading said in its latest report that interest rate fixes were down 7.84% compared to May, although year-on-year volumes were up 6.11%.
Among loan categories, purchase-fixed fell 8.99%. Meanwhile, in the refinance market, rate and term transactions increased 11.56%, but cash-outs fell 0.36% from May to June.
The latest figures come after locked volumes rose 6.78% in the previous month, with increases recorded across all loan types, after interest rates hit a 2024 high in early May before falling since.
The decline in activity in June came as 30-year fixed rates remained near 7% throughout the month, less volatile than earlier this year. Typical seasonal patterns also contributed to the decline, with buying momentum slowing after the annual spring home-buying surge, MCT said.
But June's reversal also signals the impact of continuing market headwinds, suggesting “the stalemate between limited housing supply and rising interest rates continues.”
Rates last month were lower on average than they were in May, but still higher than the typical homeowner's current rate, according to data from Freddie Mac's weekly Primary Mortgage Market Survey.
Limited interest among homeowners to put their properties up for sale or take out higher interest loans, combined with still-rising prices, means mortgage activity is likely to remain flat over the summer, MCT added.
“Market supply appears to have peaked at the beginning of the summer, prices have stabilized and no significant volume changes are expected in the near future,” the report said.
But borrower interest in refinancing has picked up in recent months, albeit from historically low levels, led by buyers who purchased a home within the past year, ICE Mortgage Technology reported this week.
Lending momentum is likely to pick up once the Federal Reserve delivers its first rate cut, a decision many in the mortgage industry have been waiting for to spur demand. Investors and lenders will be closely watching Friday's June jobs report and this month's inflation rate for signs.
If the Fed continues to signal a slowdown in the economy, “one or two rate cuts could be on the way before the end of the year,” Andrew Rose, senior director and head of trading at MCT, said in a press release.
Consumer Price Index data for June is due to be released on Thursday, July 11th.