After months of consistent hikes from the Federal Reserve, mortgage rates finally began to decline in the last week—but concerningly, mortgage demand still dropped to a nearly three-decade low. According to data from the Mortgage Bankers Association, mortgage application rates dropped by 2.9% last week, hitting the lowest levels since 1996.

A Mortgage Bankers Association report published on Wednesday revealed that even as mortgage rates descend from their 23-year high, demand in the housing market hit a 27-year low. Average contract interest rates for a 30-year fixed-rate mortgage decreased from 7.31% to 7.21%, a slight improvement but still a full percentage point higher than last year.

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These elevated interest rates stem from the Federal Reserve’s efforts to battle runaway inflation and slow down the economy. However, in the process, increased interest rates have led to dampened consumer demand and limited inventory on the housing market. Would-be sellers who secured lower interest rates are reluctant to let go of their properties in the current market. Would-be buyers are holding off because of prohibitively high rates (which last week’s decrease did little to resolve) while those that do decide to buy are competing for fewer houses than ever.

“Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates,” said Joel Kan, an MBA economist. “Rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy and signs of a cooling job market.”

Applications for a new mortgage fell by 2%, down 28% from this time last year according to the MBA’s data. At the same, applications to refinance a housing loan fell by 5%, 30% lower than last year.

As CNBC reports, mortgage rates turned higher again to start this week, and more economic data out in the coming days could impact rates further. Despite the recent fluctuation, 7% appears to be the new normal.

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