Mortgage applications stall with 8% rates

By Real Estate News

With mortgage rates still hovering around 8%, mortgage applications decreased 1% for the week ending Oct. 20 compared to the week prior, according to weekly mortgage application data from the Mortgage Bankers Association.

“Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995,” Joel Kan, MBA’s vice president and deputy chief economist, said. “These higher mortgage rates are keeping prospective homebuyers out of the market and continue to suppress refinance activity.”

Rates have now risen for seven consecutive weeks, amounting to a 69 basis points increase, Kan added. Meanwhile, the ARM share inched up to 9.5%, its highest level since November 2022.  

The share of Federal Housing Administration (FHA) loan activity inched up to 15.2% from 14.8% for the week ending Oct. 20. The share of Department of Veterans Affairs (VA) loan activity was 10.5%, down from 10.7% the week prior while the share of Department of Agriculture (USDA) loan activity decreased to 0.4% from 0.5%.

Volatile mortgage rates have hit the housing industry hard, prompting industry trade groups to call on the Federal Reserve to provide clarity about its rate path. Earlier this month the MBANational Association of Realtors  and National Association of Home Builders called on the Federal Reserve to provide market certainty about the Fed’s rate path and its plans for the mortgage-backed securities (MBS) portfolio.

The trade group wants the Fed to make two clear statements: that the Fed does not contemplate further rate hikes; and the Fed will not sell off any of its MBS holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized. 

“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the trade groups wrote in a letter to the Fed.