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The numbers: U.S. mortgage applications plunged in the latest week as mortgage rates rose over 7% as hopes fade for a near term interest rate cut by the Federal Reserve.

With consumer prices rising faster than expected, the market pushed back expectations on when the Fed will first cut interest rates this year. That in turn pressured the 30-year mortgage rate back up over 7%, the highest level since mid-December, dimming both buying and refinancing demand. 

The overall market composite index — a measure of mortgage application volume — fell in the last week, according to the Mortgage Bankers Association (MBA) said on Wednesday. 

The market index fell 10.6% to 181.6 for the week ending February 16 from a week ago. A year ago, the index stood at 199.4.

Key details: The purchase index — which measures mortgage applications for the purchase of a home — fell 10.1% from a week ago.

The refinance index fell 11.4%, as homeowners found little incentive to do so.

The average contract rate for the 30-year mortgage for homes sold for $766,550 or less was 7.06% for the week ending February 16. That’s up from 6.87% from the week before. 

The rate for jumbo loans, or the 30-year mortgage for homes sold for over $766,550, was 7.16%, up from 7% the previous week. 

The average rate for a 30-year mortgage backed by the Federal Housing Administration was up to 6.91% from 6.68%.

The 15-year rose to 6.61% from 6.53% from the previous week. 

The rate for adjustable-rate mortgages rose to 6.37% from last week’s 6.3%. 

The big picture: With a March rate cut by the Fed looking unlikely, the market has pushed mortgage rates up to 7%, which is the highest level in two months. The increase in rates could chill the housing market once more as higher rates make it more expensive to buy a home with a mortgage. 

Yet forecasters continue to say that rates will fall through 2024.

With spring home-buying season soon approaching, “expect mortgage rates to start declining … as inflation eases and the Fed finally starts cutting interest rates,” Chen Zhao, economic research lead at Redfin, added.

What the MBA said: “Potential homebuyers are quite sensitive to these rate changes, as affordability is strained with both higher rates and higher home values in this supply-constrained market,” Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, said in a statement.

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