Mortgage demand stalls as financial markets digest Trump presidency

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Mortgage demand stalls as financial markets digest Trump presidency

Residential homes in Discovery Bay, California, USA, on Thursday, November 7, 2024. Mortgage rates in the USA rose to their highest level since July.

David Paul Morris | Bloomberg | Getty Images

Mortgage rates continued to rise last week as investors pondered the future of the economy under a Trump presidency. The mortgage market basically took a breather.

According to the Mortgage Bankers Association's seasonally adjusted index, overall application volume remained essentially flat, increasing just 0.5% last week compared to the previous week. While the increase was slight, it marked the first increase in overall demand in seven weeks.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less increased from 6.81% to 6.86%, with points on loans with a 20% down payment decreasing from 0.68 to 0.60, inclusive the processing fee.

“Mortgage rates continued to rise last week, driven by higher Treasury yields as financial markets digested the likely impact of a Trump presidency,” said Joel Kan, deputy chief economist at the Mortgage Bankers Association. “The Federal Reserve’s 25 basis point rate cut was already expected and did little to move markets.”

Home loan refinance applications, the most sensitive to weekly interest rate movements, fell 2% this week, reaching their lowest level since May. However, they were 43% higher than the same week a year ago. Last year, mortgage rates were 75 basis points higher.

Mortgage applications to purchase a home rose 2% this week, 1% higher than the same week a year ago. Homebuyers may be expecting interest rates to be lower than last year, but they are also seeing higher home prices. Meanwhile, the supply of homes for sale remains low.

Kan noted that loan applications supported by the Federal Housing Administration and the U.S. Department of Veterans Affairs contributed to stronger purchasing activity, increasing 3% and 9%, respectively.

“FHA mortgage rates bucked the general trend and were lower throughout the week, which likely helped some borrowers,” Kan said. “Conventional purchase applications also increased slightly.”

Mortgage rates rose this Tuesday; The bond market was closed Monday for the Veterans Day holiday.

“The market continues to function despite election-related volatility,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “This involves a number of complex considerations. Some of these have to do with actual expectations of changes in fiscal policy in the coming years. Some of the considerations are so simple that traders go through the process of exiting (and resetting) trading positions before making the choice.”

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