Mortgage demand declined for a sixth straight week on the back of higher mortgage rates, according to weekly applications survey data published Wednesday by the Mortgage Bankers Association (MBA).
Applications dropped 10.8% on a seasonally adjusted basis during the week ending Nov. 1. Demand has plummeted 41% since the last increase in applications during the week of Sept. 20, which paradoxically coincides with the Federal Reserve’s decision to lower benchmark rates by 50 basis points (bps).
The decrease in the MBA’s Market Composite Index was primarily driven by fewer refinance applications, which were down 19% during the week but remain 48% higher than one year ago. Purchase application demand was down 7% week over week and up 2% year over year.
“Ten-year Treasury rates remain volatile and continue to put upward pressure on mortgage rates. The 30-year fixed rate last week increased to 6.81%, the highest level since July,” Joel Kan, the MBA’s vice president and deputy chief economist, said in a statement.
“Applications decreased for the sixth consecutive week, with purchase activity falling to its lowest level since mid-August and refinance activity declining to the lowest level since May. The average loan size on a refinance application dropped below $300,000, as borrowers with larger loans tend to be more sensitive to any given changes in mortgage rates.”
Many market observers are speculating that borrower demand could get worse in the near term. With Donald Trump claiming the presidency early on Wednesday, the 10-year Treasury yield jumped due to expectations of higher government spending levels. In turn, mortgage rates are likely to keep rising, although HousingWire Lead Analyst Logan Mohtashami said that spreads will have to dramatically worsen for mortgage rates to hit 8%.
The MBA reported that the refi share of mortgage applications shrank to 39.9%, down from 43.1% a week earlier. Adjustable-rate mortgages (ARMs) rose to 7% of all applications.
Government loan demand also took a hit. Applications for Federal Housing Administration (FHA) loans shed 90 bps during the week to account for 15.5% of applications, while U.S. Department of Veterans Affairs (VA) loans were down 210 bps for a market share of 12.5%.
Contract interest rates for 30-year fixed-rate loans with conforming balances of $766,650 or less jumped 8 bps during the week to 6.81%. Rates for jumbo loans with balances above $766,650 were up 21 bps to 6.98%.
Rates for 30-year fixed loans through the FHA rose 20 bps to 6.75%. Rates for 15-year loans were down 6 bps to 6.27%, while those for 5/1 ARMs dropped 15 bps to 6.05%.
