The highest mortgage rates in more than 20 years coincided with one of the deadliest hurricanes on record in the United States, both contributing to a steep drop in mortgage demand.
Total mortgage application volume fell 14.2% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index, to the lowest level since 1997.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.75% from 6.52%, with points decreasing to 0.95 from 1.15 (including the origination fee) for loans with a 20% down payment.
"The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone," noted Joel Kan, an MBA economist.
Refinance volume, which is most sensitive to weekly interest rate moves, dropped 18% for the week and was 86% lower than the same week one year ago. The refinance share of mortgage activity decreased to 29% of total applications from 30.2% the previous week.
Mortgage applications to purchase a home dropped 13% for the week and were a steep 37% lower year over year.
"There was also an impact from Hurricane Ian's arrival in Florida last week, which prompted widespread closings and evacuations. Applications in Florida fell 31%, compared to 14% overall, on a non-seasonally adjusted basis," Kan added.
With higher interest rates making an already pricey housing market even more expensive, homebuyers turned more to adjustable-rate mortgages, which offer a lower interest rate. That share of activity increased to 11.8%, up from 8.5% a month ago and around 3% at the start of this year, when mortgage rates were less than half what they are now.
Mortgage rates came down slightly this week, according to another survey from Mortgage News Daily, but all bets are off at the end of the week when the important monthly employment report is released. Depending on how investors view the results - and how the Federal Reserve might react to those results - mortgage rates could move decisively in either direction.
This article was originally published on NBCNews.com