Mortgage demand retracted for the fourth consecutive week as the housing market struggles against the currents of high inflation and rising interest rates. The development comes on the same day the Federal Reserve is expected to enact another rate hike that may drive mortgage rates higher.

On Wednesday, the Mortgage Bankers Association (MBA) released its latest data showing mortgage applications fell by 1.8% in the last week. Applications for a loan to purchase a home fell 1% for the week but were 18% lower than the same week one year ago.

The housing market is up against strong headwinds that do not promise to ease in the near-term. Affordability issues at a time of low consumer confidence and higher mortgage rates have kept potential buyers out of the market until record-high prices start to come down.

At the same time, inflation readings have continued to remain high, with the most recent reading of the Consumer Price Index (CPI) standing at 9.1% for June. As a result, consumer spending on non-essentials like food and gas are on the decline.

Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, made note of the pains currently prevalent in the housing market, particularly the increasing economic uncertainty with recessionary fears and affordability challenges that have dogged it for the better part of a year.

However, Kan pointed to what he recognized as a “silver lining” that may appear in the second half of 2022, depending on market conditions.

"A potential silver lining for the housing market is that stabilizing mortgage rates and increases in for-sale inventory may bring some buyers back to the market during the second half of the year," Kan said in a press release.

But the market’s road is likely to remain bumpy. The Federal Reserve’s Open Market Committee (FOMC) is holding its two-day meeting this week, and it is widely expected that the Fed will decide to hike interest rates once again, given that inflation has remained persistent.

The last rate hike initiated by the Fed on June 15 was the largest since 1994, but it is suspected that a similar-sized hike may follow after the FOMC meeting concludes.