The Mortgage Bankers Association reported that mortgage applications fell last week–dropped by a one-two combination of rising interest rates and stock declines.
Overall, mortgage application volume suffered, falling by 22% compared to a year ago and 3.2% lower compared to the previous week. The general market consensus is that the Federal Reserve will raise interest rates by another 25 basis points in December while the stock market has been languishing after getting roiled in October by volatility.
Combine the two and you have hesitant homebuyers that are wary of the current economic landscape. The same can be said for existing homeowners who are on the sidelines when it comes to refinancing their current mortgages.
“Recent volatility in the financial markets and increasing rates continue to adversely impact mortgage application activity, even as the general economic outlook remains positive,” said Joel Kan, an MBA economist. “Both home purchase and mortgage refinance applications decreased over the week, driven largely by declines in conventional applications.”
The number of mortgage applications for home purchases have fallen to a level not seen since February 2017–applications fell by 2.3% for the week and 3% lower compared to a year ago. Refinance applications by existing homeowners fell by 4.3% for the week and 40% versus a year ago–a level not seen in almost 18 years as tapping into existing equity would mean foregoing the low interest rate obtained in previous low-rate years.
The Federal Reserve ended a two-day policy meeting last week with the announcement that interest rates would remain unchanged as expected by the capital markets. However, the CME Group’s Fed Watch Tool shows a 75.8% chance that a fourth and final rate hike will cap off 2018.