Refinance activity has also taken a significant hit as rates have risen.
Mortgage rates continued their upward climb this week, nearing 7 percent and further cooling homebuyer demand, according to Freddie Mac.
The average rate on a 30-year fixed-rate mortgage edged up to 6.79 percent this week, Freddie Mac
reported on Nov. 7. That’s a rise from 6.72 percent the previous week and above the four-week average of 6.62 percent, as tracked by Freddie Mac’s
Primary Mortgage Market Survey (PMMS). Meanwhile, the 15-year fixed-rate mortgage averaged 6 percent, slightly up from last week’s 5.99 percent.
The steady increase in rates has significantly dampened buyer interest. Freddie Mac and the Mortgage Bankers Association (MBA) both highlighted this trend, with the MBA
reporting a 5 percent drop in home-purchase applications last week and a sharper 10.8 percent decline in total mortgage applications.
Household budgets have been strained by several years of high inflation. Freddie Mac chief economist Sam Khater noted that buyers have become highly rate-sensitive under the current circumstances.
“It is clear purchase demand is very sensitive to mortgage rates in the current market environment,“ Khater said. ”As soon as rates began to rise in early October, purchase applications fell and over the last month have declined 10 percent.”
Refinance activity has also taken a significant hit as rates have risen. According to the MBA’s latest survey, mortgage-refinance applications plummeted 19 percent last week. Joel Kan, the MBA’s vice president and deputy chief economist, attributed this to ongoing volatility in 10-year Treasury yields, which are a key benchmark for mortgage rates.
“Ten-year Treasury rates remain volatile and continue to put upward pressure on mortgage rates,” Kan explained in a statement.
Mortgage rates have been
climbing since mid-September,
tracking closely with 10-year Treasury yields. Both metrics hit recent highs in late April, with mortgage rates reaching around 7.2 percent and 10-year yields peaking at 4.6 percent. They then steadily declined over the summer—mortgage rates dipped to around 6 percent and 10-year yields dropped to 3.6 percent by early September. This trend reversed after the Federal Reserve cut interest rates by 50 basis points in mid-September, triggering an uptick in both metrics.
Some analysts have pointed out that this increase in 10-year yields follows a familiar pattern seen during previous Fed rate-cutting cycles. Padhraic Garvey, ING’s regional head of research for the Americas, highlighted in a
recent report that 10-year yields typically rise by 20–50 basis points after the Fed’s first rate cut. Garvey predicted in a separate
note that 10-year yields would bottom out around 3.5–3.7 percent at some point in the remainder of 2024, before climbing to 4.5 percent or higher.
Various factors affect 10-year yields, including Treasury issuance and shifts in investor sentiment. More government borrowing would drive issuance—and yields—higher, with risk-on market sentiment having a similar effect as investors dump the relative safety of Treasurys in favor of riskier assets like stocks. Treasury yields and prices move inversely, with bond selloffs driving yields higher.
