Mortgage demand flatlines but Fed interest rate cut offers hope to homebuyers

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Demand for mortgages has stagnated as interest rates have risen to their highest level in nearly three months. 

As reported by the Mortgage Bankers Association (MBA), total mortgage applications were up by just 0.6% for the week ending October 25, while refinancing was down 1% during the same period.

Although still markedly lower than they were this time last year, average contract interest rates for 30-year fixed rate mortgages with conforming loan balances ($484,350 or less) jumped to 4.05% from 4.02%.

Thirty-year fixed rate mortgages backed by the FHA also got pricier, with interest percentages rising from 3.79% to 3.83% last week.

Bounce back likely as Feds cut interest rates

Nevertheless, it might be a good time to consider whether one of the best mortgage lenders is right for you, as the market for homebuyers and refinancers is competitively positioned compared to 2018.

The MBA puts refinance demand as 134% higher than this time last year, while its unadjusted Purchase Index notes a 10% year-on-year increase, thanks to lower interest rates.

“The 10-year Treasury rate rose slightly last week, as markets expected more progress toward a trade deal between the U.S. and China. Considering how much lower rates are compared to the end of 2018, purchase applications should continue showing solid year-over-year gains," commented Joel Kan, MBA associate vice president of economic and industry forecasting.

Moreover, mortgage demand seems likely to rebound quickly from last week's blip, after the Federal Reserve decreased its interest rate benchmark to a range of 1.5% to 1.75% – its third cut of the year.

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James Laird

A technology journalist with nearly 10 years of experience, James is the former News and Features Editor at Trusted Reviews, and has also served as regional Editor of Lifehacker. His articles have been spotted on sites ranging from The Sun to InStyle, but his true love is shiny things and the story behind them. An avid golfer in his spare time, you'll also regularly catch him hovering over the BBQ listening to Pearl Jam.