Demand for mortgages stagnates as the financial markets process the Trump administration

Last week, as investors pondered the Trump presidency economy's prospects, mortgage rates kept rising. In essence, the mortgage market trends paused.

According to the seasonally adjusted index of the Mortgage Bankers Association, the overall amount of applications remained virtually unchanged last week, increasing by only 0.5% over the previous one. Despite being small, the gain was the first increase in Mortgage demand 2024 overall in seven weeks.

With a 20% down payment, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan amounts of $766,550 or less went from 6.81% to 6.86%, while the origination fee dropped from 0.68 to 0.60 points.

As financial markets impact processed the anticipated effects of a Trump administration, rising Treasury yields drove mortgage rates to rise last week, according to Joel Kan, deputy chief economist for the Mortgage Bankers Association. The 25 basis point rate cut by the Federal Reserve, which was already anticipated, had little impact on the markets.

The weekly drop in home loan refinance applications, which are primarily affected by weekly interest rate fluctuations, was the lowest since May. However, compared to the same week last year, they were 43% higher. Mortgage rates were 75 basis points higher at that time last year.

Mortgage applications for house purchases increased by 2% over the week and by 1% over the same period last year. Although rates may be lower than they were a year ago, housing prices are also rising. In the meantime, there is still a shortage of available dwellings.

Stronger purchase activity was fueled by applications for loans guaranteed by the U.S. Department of Veterans Affairs and the Federal Housing Administration, which increased by 9% and 3%, respectively, according to Kan.

He said that FHA mortgage rates were lower during the week, which probably benefited certain borrowers, defying the general trend. Applications for traditional purchases increased little as well.

The bond market was closed on Monday due to the Veterans Day holiday; therefore, mortgage rates increased this Tuesday.