By Vince Golle | Bloomberg
The US housing market continues to struggle as mortgage applications hit their lowest levels in almost three decades. This downward trend is being fueled by rising borrowing costs, marking the sixth consecutive week of increases.
According to the Mortgage Bankers Association, the overall index of applications for home purchases or refinancing fell 6.9% in the week ending October 13, reaching a reading of 166.9 – the lowest since May 1995.
Recent data shows that contract rates on 30-year fixed mortgages increased by 3 basis points to 7.7%, while rates on five-year adjustable mortgages climbed 19 basis points to 6.52% – the second-highest recorded by MBA since 2011.
Furthermore, the index of home purchase applications dropped over 5%, hitting the lowest level seen since 1995. The refinancing gauge also experienced a significant decline, marking the largest decrease since February.
The correlation between mortgage rates and Treasury yields is evident. On Tuesday, the 10-year note yield rose to its highest level since 2007, following strong economic data that suggested the Federal Reserve may need to raise interest rates again.
The Mortgage Bankers Association’s survey, which has been conducted weekly since 1990, collects responses from mortgage bankers, commercial banks, and thrifts. This data accounts for over 75% of all retail residential mortgage applications in the United States.
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