Rising rates pushed US mortgage demand to a new monthly low
United States mortgage applications fell last week as borrowing costs climbed to their highest level in a month. The Mortgage Bankers Association (MBA) reported a 5.2% drop in its seasonally adjusted Market Composite Index for the week ending November 14, marking a four-week low in mortgage activity.
Purchase and refinance demand both retreated, with the Refinance Index down 7% and the Purchase Index slipping 2% on a seasonally adjusted basis.
“Mortgage rates increased for the third consecutive week, with the 30-year fixed rate inching higher to its highest level in four weeks at 6.37%,” Joel Kan, MBA’s vice president and deputy chief economist, said.
“Application activity over the week was lower, with potential homebuyers moving to the sidelines again, although there was a small increase in FHA purchase applications,” Kan said.
He noted that refinance demand dropped as borrowers reacted to rising rates, and the average loan size reached its lowest level since August.
Refinance activity, which is particularly sensitive to rate changes, has been volatile. While last week’s 7% drop pushed the index to a two-month low, refinance volume remained 125% higher than the same week a year ago, when rates were even higher and overall activity was subdued.
Purchase applications, meanwhile, were 26% higher than the same week last year, but have hovered at similar levels for several months, showing little response to recent rate fluctuations.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) rose to 6.37%, with points unchanged at 0.62 for 80% loan-to-value ratio loans.
Jumbo rates edged down to 6.39%, while FHA-backed loans held steady at 6.14%.
Other signs also pointed to a tough housing market. The National Association of Home Builders and Wells Fargo recently said more builders now see conditions as poor rather than good, and sales expectations have dropped.
To spark buyer interest, 41% of builders cut prices in November, the highest share since the onset of the pandemic. This is the first time this measure has passed 40% in the post-Covid period.
With mortgage rates at a four-week high and affordability still a major hurdle, US mortgage demand continued to cool, leaving both buyers and lenders in wait-and-see mode.
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