Purchase applications fall, as rates tick higher
The average mortgage rate on a 30-year fixed home loan has edged up this week, marking a slight increase from last week's 6.72%, according to Freddie Mac. “Mortgage rates continued to inch up this week, reaching 6.79%,” stated Sam Khater, Freddie Mac’s chief economist.
This recent uptick in mortgage rates coincides with the aftermath of the presidential election, which could impact mortgage rates for both the short and long term.
Hannah Jones, a senior economic research analyst at Realtor.com, noted that the election’s economic implications might keep mortgage rates volatile as markets digest the potential for policy-driven inflation.
Investors are paying close attention to the 10-year Treasury yield, which often influences mortgage rates. After the election, the yield jumped 0.2 percentage points in response to President-elect Donald J. Trump’s win, marking its largest movement in over two years. This spike reflects investor concerns over possible inflation stemming from Trump’s policy proposals on taxes, tariffs, and government spending. The 10-year Treasury yield, now nearing 4.7%, signals market expectations for stronger economic growth coupled with potential inflation—a combination that could sustain or elevate mortgage rates.
“It is clear purchase demand is very sensitive to mortgage rates in the current market environment,” Khater pointed out. “As soon as rates began to rise in early October, purchase applications fell, and over the last month have declined 10 percent.”
This rate increase follows six consecutive weeks of rising mortgage rates. Despite recent optimism that Federal Reserve rate cuts could drive mortgage rates lower, recent economic data and inflation fears tied to Trump’s anticipated policies are exerting upward pressure. These inflationary concerns could keep rates elevated, potentially leading some buyers and sellers to wait until the new year before entering the market.
The housing market has responded with mixed signals. While rising mortgage rates make buying a home more costly, median home prices dipped slightly, dropping by 0.7% for the week ending November 2 compared to the same time last year. Inventory levels, on the other hand, surged 26.6% above last year’s numbers, providing buyers with more choices as new listings continue to enter the market. According to Jones, “Inventory has climbed annually for a full calendar year due in part to slowing buyer activity.”
Additionally, homes are now staying on the market longer, spending an average of eight extra days compared to last year, which could benefit potential buyers who are waiting for more favourable conditions. Ralph McLaughlin, senior economist at Realtor.com, added that buyers have reason to stay hopeful, as the current market offers “the slowest seasonal market in five years, nearly 20% of listings coming with price cuts, and the highest inventory since December 2019.”
Although rates may stabilize in the coming months, they are likely to remain higher than initially expected, driven by both economic volatility and post-election financial market reactions.
