Loan applications declined somewhat even though the rate of a 30-year mortgage moved lower from week-ago levels. File photo by Alexis C. Glenn/UPI | License Photo
Nov. 30 (UPI) -- Even with a slight decline in the average interest rate for a 30-year, fixed-term mortgage, the Mortgage Bankers Association said Wednesday that loan applications declined.
The average rate for a 30-year, fixed-rate mortgage for loan balances of $647,200 or less declined from 6.67% last week to 6.49% for the week ending Nov. 25. The association's Market Composite Index, a gauge of loan application volume, nevertheless declined by 0.8% on a seasonally adjusted basis, compared with week-ago levels.
"Additionally, mortgage rates for most other loan types declined," said Joel Kan, the MBA's vice president and deputy chief economist. "The economy here and abroad is weakening, which should lead to slower inflation and allow the Fed to slow the pace of rate hikes."
A decline in payrolls from ADP on Wednesday was blamed in part on the aggressive rate hikes from the U.S. Federal Reserve. Hiring in November came in lower than expected, confirming U.S. Fed Chair Jerome Powell's warnings from earlier this year that there would be some "unfortunate costs" as a result of the efforts to dampen consumer inflation by increasing borrowing costs.
The Fed has raised its benchmark interest rate six times so far this year. Mortgage applications for a new home actually increased by 4% from week-ago levels, but demand indicators from the MBA showed a 41% decline from year-ago levels.
An overall decline in loan applications could be a troubling sign of looming consumer pressures. The S&P CoreLogic Case-Shiller index of the average price of a home declined from 12.9% to 10.6% in September, the last full month for which data are available.
Speaking from Detroit on Wednesday, U.S. Federal Reserve Gov. Lisa D. Cook, said monetary tightening, to the tune of nearly 4 percentage points so far this year, is catching up with consumers given the resultant high cost of borrowing.
"That tightening is clearly slowing demand in sectors that are interest sensitive, especially housing, with residential investment contracting sharply," she said.