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For the week ending June 2, mortgage applications fell 1.4% from the prior week despite mortgage rates dropping to 6.81% from 6.91% over the same period. After more than a year of consistent increases by the Federal Reserve, the Federal Open Market Committee (FOMC) is expected to pause hikes at its upcoming meeting next week, depending on the inflation reading that same day.

Even as rates soften, a lack of for-sale inventory continues to chip away at purchasing power, leading to a dip in purchase applications and refinancing applications at the start of June, HousingWire reports.

“Mortgage rates declined last week from a recent high, but total application activity slipped for the fourth straight week,” said Joel Kan, MBA’s vice president and deputy chief economist. “Overall applications were more than 30% lower than a year ago, as borrowers continue to grapple with the higher rate environment.”

“Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers,” said Joel Kan.

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