Mortgage demand has fallen 41% since the Fed cut interest rates by 50 basis points

Mortgage demand fell for the sixth straight week due to higher mortgage rates, according to weekly applications survey data released Wednesday Mortgage Bankers Association (MBA).

The number of applications fell by a seasonally adjusted 10.8% in the week ending November 1st. Since the last spike in applications in the week of September 20th, which paradoxically coincides with that, demand has plummeted by 41% Federal ReserveDecision to cut key interest rates by 50 basis points (bps).

The decline in MBA's Market Composite Index was primarily due to fewer refinancing applications, which fell 19% for the week but were still 48% higher than a year ago. Purchase request demand fell 7% week-over-week and increased 2% year-over-year.

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

“Applications fell for the sixth straight week, with purchasing activity falling to its lowest level since mid-August and refinancing activity falling to its lowest level since May. The average loan size on a refinance application fell below $300,000 because borrowers with larger loans tend to be more sensitive to changes in mortgage rates.”

Many market observers speculate that demand from borrowers could deteriorate in the short term. With Donald Trump assuming the presidency early Wednesday, the 10-year Treasury yield jumped on expectations of higher government spending. In return, however, mortgage interest rates are likely to continue to rise Housing wire Senior analyst Logan Mohtashami said spreads would have to worsen dramatically for mortgage rates to reach 8%.

The MBA reported that the refi share of mortgage applications fell to 39.9% from 43.1% a week earlier. Adjustable-rate mortgages (ARMs) rose to 7% of all applications.

Demand for government loans also suffered a slump. Applications for Federal Housing Administration (FHA) loans lost 90 basis points for the week and accounted for 15.5% of applications US Department of Veterans Affairs (VA) loans declined 210 basis points, representing 12.5% ​​market share.

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

Interest rates on 30-year fixed loans through the FHA rose 20 basis points to 6.75%. Rates on 15-year loans fell 6 basis points to 6.27%, while rates on 5/1 ARMs fell 15 basis points to 6.05%.