Borrowing costs keep inching higher, even as the Federal Reserve cuts interest rates.
The 30-year, fixed-rate mortgage increased for the sixth consecutive week, averaging 6.79% as of Nov. 7, Freddie Mac said Thursday. That's up from the previous week’s average of 6.72% but still lower than the same time a year earlier when it was 7.50%, according to the mortgage giant.
The 15-year, fixed-rate average also rose, averaging 6%, compared to 5.99% last week. A year earlier it was 6.81%.
Daily mortgage rates, typically more volatile than the weekly averages, also rose. As of Thursday afternoon, the 30-year, fixed-rate mortgage rose 0.09% compared to the previous day and was 7.13%, Mortgage News Daily data showed. The 15-year, fixed-rate mortgage inched up 0.08% to 6.55%.
The higher rates are reducing demand for mortgages and refinancings at a time when industry analysts expected a more robust real estate market.
With inflation coming down, the Federal Reserve cut interest rates by half a percentage point in September and followed that up on Thursday with a cut of 25 basis points. With the latest move, the Fed's target for federal funds rate is 4.5% to 4.75%.
Treasury rate increasing
There's a clear disconnect between the normal relationship of mortgage rates and the Federal Reserve cutting interest rates, according to Justin Benefield, academic director for Auburn University's Winchester Institute for Real Estate Development.
"Mortgage rates more closely track with the 10-year Treasury rate, and that rate's going up because the economy is strong and people expect it to continue to be strong," Benefield said in an interview.
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Matthew Graham, chief operating officer of Mortgage News Daily, wrote in a post Wednesday that there will be "absolutely no impact" on mortgage rates from the Fed's most recent announcement. Even a second rate cut could lead to higher mortgage rates, just as what happened after the Fed's September decision, Graham noted.
"We warned of that possibility excessively in the run-up to that rate cut," he wrote. "If you didn't believe us then, hopefully you do now."
For the week ending Nov. 1, mortgage applications decreased 10.8% from one week earlier, according to the Mortgage Bankers Association. Refinancings decreased 19% from the previous week.
Applications fell for the sixth consecutive week, with purchase activity dropping to the lowest level since mid-August, according to the trade group. Refinancings declined to the lowest level since May.
"It is clear purchase demand is very sensitive to mortgage rates in the current market environment," Sam Khater, Freddie Mac’s chief economist, said in a statement. "As soon as rates began to rise in early October, purchase applications fell and over the last month have declined 10 percent.”