Mortgage demand has fallen 41% since the Fed’s 50 bps cut

Demand for mortgages fell for the sixth consecutive week on the back of higher interest on mortgage loansaccording to weekly application survey data released Wednesday by Realkreditrådet’s Association (MBA).

Applications fell 10.8% on a seasonally adjusted basis during the week ending November 1. Demand has plummeted by 41% since the last spike in applications in the week of September 20, paradoxically coinciding with Federal Reserves decision on lower benchmark interest rates by 50 basis points (bps).

The decline in MBA’s Market Composite Index was primarily driven by fewer people refinancing applicationswhich fell 19% during the week but remains 48% higher than a year ago. Purchase application demand was down 7% week over week and up 2% year over year.

“Ten-year Treasury yields remain volatile and continue to put upward pressure on mortgage rates. The 30-year fixed rate last week rose to 6.81%, the highest level since July,” Joel Kan, MBA’s vice president and deputy chief economist, said in a declaration.

“Applications fell for the sixth consecutive week, with purchase activity falling to the lowest level since mid-August and refinancing activity falling to the lowest level since May. The average loan size of a refinance application fell below $300,000 as borrowers with larger loans have tend to be more sensitive to any given change in mortgage rates.”

Many market observers speculate that demand for borrowers could worsen in the short term. With Donald Trump demands the presidency early Wednesday, the 10-year Treasury yield rose on expectations of higher government spending. On the other hand, mortgage rates will likely continue to rise, though HousingWire Lead analyst Logan Mohtashami said spreads will have to worsen dramatically before mortgage rates reach 8%.

The MBA reported that the refi share of mortgage applications fell to 39.9%, down from 43.1% a week earlier. Adjustable interest rate loan (ARMs) increased to 7% of all applications.

The government’s loan demand also took a hit. Applications for Federal Housing Administration (FHA) loans fall 90 bps over the week to account for 15.5% of applications, while US Department of Veterans Affairs (VA) loans fell 210 bps to a 12.5% ​​market share.

Contract rates for 30-year fixed-rate loans with conforming balances of $766,650 or less jumped 8 bps during the week to 6.81%. Interest rates on jumbo loans with balances over $766,650 rose 21 bps to 6.98%.

Rates for 30-year fixed loans through the FHA rose 20 bps to 6.75%. 15-year mortgage rates fell 6 bps to 6.27%, while 5/1 ARM rates fell 15 bps to 6.05%.