Rising mortgage rates took some steam out of borrower demand for mortgages last week, with applications for purchase loans and refinancing both taking a hit, the Mortgage Bankers Association reported Wednesday.
Applications for purchase loans were down by a seasonally adjusted 1 percent last week compared to the week before, but remained 26 percent higher than a year ago, the MBA said in releasing the results of its Weekly Mortgage Applications Survey.
Requests to refinance were down 3 percent week over week but up 151 percent from a year ago.
Joel Kan
“Despite a decline last week, refinance applications are still significantly higher than a year ago,” MBA Deputy Chief Economist Joel Kan said in a statement. “The average loan size for refinance applications was at its highest level in six weeks, as borrowers with larger loans continued to seek ways to lower their monthly payments.”
Although purchase applications were down slightly, there was “a slight increase in FHA purchase applications as prospective homebuyers continue to seek loan options to help manage challenging affordability conditions,” Kan said.
Mortgage rates hit a new 2025 low of 6.12 percent on Oct. 28, but have been on the rise after Federal Reserve Chair Jerome Powell said there’s no guarantee the Fed will cut short-term interest rates for a third time this year when policymakers meet again on Dec. 10.
Mortgage rates on the rebound
At 6.21 percent Tuesday, rates for 30-year fixed-rate conforming mortgages were up 9 basis points from their 2025 low, but have a long way to go before returning to this year’s high of 7.05 percent registered on Jan. 14, according to lender data tracked by Optimal Blue.
Tariffs imposed by the Trump administration are having an effect on prices paid by consumers, pushing inflation away from the Fed’s 2 percent target.
The partial numbers that Fed policymakers have seen during the government shutdown suggest that inflation rose to 2.8 percent in September, “significantly above our 2 percent target,” Federal Reserve Governor Lisa Cook said Monday.
But Cook and her Fed colleagues expect the impact of tariffs will be temporary — a view shared by Pantheon Macroeconomics Senior U.S. Economist Oliver Allen.
Oliver Allen
At 48.7 percent, the Institute for Supply Management’s manufacturing index for October “suggests that the manufacturing sector remained anemic last month, with many industries continuing to cite tariffs as a major brake on activity,” Allen said in a note to clients.
Of the six largest manufacturing industries, only two — food, beverage and tobacco products, plus transportation equipment — expanded in October, ISM survey Chair Susan Spence said in a statement.
Fed policymakers are trying to balance their dual mandate by keeping rates low enough to maximize employment without fueling inflation.
With the Oct. 1 government shutdown continuing, policymakers are flying in the dark with respect to some of the data used to make their decisions, with reports from the Bureau of Labor Statistics, Bureau of Economic Analysis and Census Bureau all in limbo.
The CME FedWatch Tool, which tracks futures markets to gauge the probability of future Fed moves, on Wednesday put the odds of another Fed rate cut on Dec. 10 at 62 percent, down from 94 percent on Oct. 27 — two days before Powell’s press conference.
Treasury Secretary Scott Bessent expressed frustration with Powell over the weekend, claiming on CNN that if “the Fed brings down mortgage rates, then they can end this housing recession.”
The Fed has lowered the short-term federal funds overnight rate by half a percentage point this year, with rate cuts in September and October. But the Fed doesn’t have direct control over mortgage rates, which climbed at the end of last year even as the Fed brought short-term rates down by a full percentage point.
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