Mortgage demand drops as interest rates hit a 2-month high

Higher mortgage rates and a severe shortage of homes for sale are taking their toll on mortgage demand.

Mortgage applications to purchase a home dropped 4.8% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 26% lower than the same week one year ago.

“Purchase applications decreased to the slowest pace in a month, as buyers remain wary of this rate volatility, but also as for-sale inventory in many parts of the country remains scarce,” wrote Joel Kan, an MBA economist, in a release.

The average contract…