The gradual rise in mortgage rates following the Federal Reserve’s last rate cut finally took some of the wind out of homebuyers’ sails last week, with lenders seeing fewer applications for purchase loans and requests to refinance, the Mortgage Bankers Association (MBA) reported Wednesday.
The MBA’s Weekly Mortgage Applications Survey showed applications for purchase loans were down by a seasonally adjusted 2 percent last week, but still up 26 percent from a year ago.
Requests to refinance dropped 7 percent week over week but were up 125 percent from a year ago.
Joel Kan
“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 percent,” MBA Deputy Chief Economist Joel Kan said in a statement. “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.”
Strong start to November
Source: MBA Weekly Applications Survey.
Homebuyer demand had been on the rise since mid October, with applications for purchase loans in the first week of November posting the strongest start for the month since 2022.
At 168.7 for the week ending Nov. 14, the MBA’s seasonally adjusted purchase loan index was down 7 percent from its 2025 high of 180.9 registered on July 4.
Mortgage rates trending up again
Mortgage rates tracked by Optimal Blue hit a new 2025 low of 6.12 percent on Oct. 28 but have been on the rebound over uncertainty about the prospects for a December rate cut.
After cutting the short-term federal funds rate by 1/4 of a percentage point on Sept. 17 and again on Oct. 29, Fed policymakers are sounding hesitant about cutting rates at their final meeting of the year on Dec. 10, over fears that inflation has not been subdued.
The CME FedWatch Tool, which tracks futures markets to predict the probability of future Fed moves, showed investors on Wednesday now see only a 34 percent chance of a December rate cut, down from 94 percent on Oct. 17.
The Trump administration has been adamant that the Fed has been too slow to cut rates. Trump ally Stephen Miran, who replaced Biden appointee Adriana Kugler on the Federal Reserve Board in September, has voted for a bigger 1/2 percentage point rate cut at each of the Fed’s last two meetings.
With Atlanta Fed President Raphael Bostic set to retire in February and Trump attempting to remove Federal Reserve Governor Lisa Cook from her position, there’s speculation that the Trump administration might seek to influence the appointments of regional bank presidents.
While the Trump administration would like to see lower mortgage rates, attempts to undermine the Fed’s independence could send rates in the other direction.
That’s because the Fed doesn’t have direct control over long-term interest rates, which are determined largely by investor demand for Treasurys and mortgage-backed securities (MBS).
MBS investors who fund most home loans will demand higher yields if they think inflation is worsening, no matter what the Fed does with short-term rates.
The Fed cut, and mortgage rates went up
That’s what happened when the Fed approved three rate cuts totaling a full percentage point at the end of 2024. Mortgage rates went up by an equal amount as inflation began trending up again.
Minutes of the Fed’s Oct. 28-29 meeting released Wednesday “underline that the [Fed] remains far more divided than usual on the next steps for policy,” Pantheon Macroeconomics Senior U.S. Economist Oliver Allen said in a note to clients.
While several participants envisioned another 1/4 percentage point rate cut in December if the economy continued to evolve as expected, “many” thought keeping rates on hold for the rest of this year would likely be appropriate.
Oliver Allen
“That chimes with more recent speeches from a raft of regional Fed chairs, including this year’s four voting members, urging a cautious approach to further easing,” Allen said.
Due to the government shutdown, the Bureau of Labor Statistics will not publish an October employment report, and the numbers for November won’t be released until Dec. 16 — six days after the Fed meets next.
“We’re not ready to give up our call for a December easing just yet, but tomorrow’s September employment report will have to be weak,” Allen said.
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