Mortgage applications in US drop as rates hit highest level since July

(MENAFN) US mortgage applications saw a decline last week, coinciding with a surge in mortgage rates, which have reached their highest levels since July, according to a report from the Mortgage Bankers Association (MBA) released on Wednesday. The market composite index, which reflects the volume of mortgage loan applications, decreased by 0.1 percent on a seasonally adjusted basis for the week ending October 28. When viewed on an unadjusted basis, the index was down 1 percent compared to the previous week.

Joel Kan, the MBA's vice president and deputy chief economist, commented that mortgage applications remained nearly unchanged last week despite the uptick in rates, which marked the fourth increase in five weeks. He attributed this volatility to fluctuations in the bond market, which were heightened by the upcoming presidential election and the next Federal Open Market Committee (FOMC) meeting. Kan noted that after a brief period of increased activity in September—when rates were nearly 60 basis points lower—overall applications have dropped by 27 percent, primarily due to a decrease in refinance applications. Government refinances saw a significant decline of 12 percent over the past week.

The report indicated that the average contract interest rate for 30-year fixed-rate mortgages rose to 6.73 percent last week, up from 6.52 percent the previous week. Similarly, the rate for 15-year fixed-rate mortgages increased to 6.27 percent, compared to 5.98 percent in the prior week. This upward trend in mortgage rates is impacting the overall demand for housing, particularly among potential buyers looking to purchase homes.

Despite the current dip in near-term purchase application activity, Kan expressed optimism about future housing demand. He highlighted the expectation that younger homebuyers will continue to drive purchase growth over the next few years, especially as the inventory of homes for sale gradually becomes more available. The MBA survey captures more than 75 percent of US retail residential mortgage applications, providing a comprehensive overview of the market's trends.

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