Despite expectations of further interest rate cuts by the Federal Reserve, the 30-year fixed mortgage rate in the U.S. jumped last week to its highest level since July. At the same time, demand for mortgages and refinancing has dropped, according to a report by the Mortgage Bankers Association (MBA).
For the week ending with October 25, the 30-year fixed mortgage rate was 6.73%, marking a 21 basis points increase compared to 6.52% in the week prior. Despite this, the mortgage applications have seen only a slight slide of 0.1%.
At the same time, refinancing applications have seen a significant drop of 6%. They accounted for just 43.1% of total mortgage applications compared to the historical average of 48%.
“After a brief burst of activity in September when rates were almost 60 basis points lower, overall applications have declined 27 percent, driven by a pullback in refinances. Government refinances accounted for a large part of the decrease, dropping 12 percent over last week,” MBA economist Joel Kan said in a press release.
The mortgage rates will likely continue to rise in the near future. According to a recent survey, the 30-year fixed mortgage rate already climbed to 7% by Tuesday. A likely reason for surging rates is the overall good health of the economy and the belief that the Fed will proceed with slower cuts because of it.