Mortgage applications plunged 29% last week, the most since 2009, amid US lockdown

• Mortgage application volume fell 29% in the week ending March 20, the largest drop since 2009, according to a Wednesday report from the Mortgage Bankers Association.
• The home-purchase index fell 15% to its lowest level since August 2019 and decreased 11% on the year, the first year-over-year decline in more than three months.
• The drop in applications comes amid the coronavirus pandemic, which has halted much US economic activity to curb the spread of COVID-19 cases.
• "Potential homebuyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook," Joel Kan, MBA's associate vice president of Economic and Industry Forecasting, said in a statement.
• Read more on Business Insider.

US consumers are backing away from the housing market as the coronavirus pandemic shuts down large swaths of the economy in an attempt to curb the spread of disease.

Mortgage application volume fell 29% in the week ending March 20, the largest drop since 2009, according to a Wednesday report from the Mortgage Bankers Association. The home-purchase index fell 15% to its lowest level since August 2019 and decreased 11% on the year, the first year-over-year decline in more than three months.

Refinance applications also decreased 34% from the previous week, but are up 195% from a year ago.

"Potential homebuyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook," Joel Kan, MBA's associate vice president of Economic and Industry Forecasting, said in a statement.

The coronavirus pandemic has sent many states into lockdown mode, closing schools, factories, and restaurants, and encouraging consumers to stay home and practice social distancing. Uncertainty over when the drastic measures to slow the spread of the disease will end has roiled markets, whiplashing stocks, bonds, and mortgage rates, which take cues from 10-year US Treasury yields.

Read more: 36 units by age 21 and 6-figure profits: How Josiah Pott went from living in his grandma's trailer to being a real-estate-investing phenom - and nabbed $372,000 from a single deal

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.82% from 3.74% in the last week, according to the MBA.

"Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines, and remote work staffing challenges," said Kan.

Still, there is hope that actions by the Federal Reserve to restore liquidity and stabilize the mortgage-backed securities market could lend a helping hand to homebuyers looking to refinance.

It "could put downward pressure on mortgage rates, allowing more homeowners the opportunity to refinance," Kan said.

Get the latest coronavirus analysis and research from Business Insider Intelligence on how COVID-19 is impacting businesses.