US mortgage applications hit 28-year low as rates keep rising

A MEASURE of US mortgage applications stumbled to an almost three-decade low as borrowing costs increased for a sixth-straight week, indicating further downside momentum for a battered housing market.

The Mortgage Bankers Association’s (MBA) overall index of applications to purchase or refinance a home slumped 6.9 per cent in the week ended Oct 13 to 166.9. That was the weakest reading since May 1995.

The contract rate on a 30-year fixed mortgage edged up 3 basis points to 7.7 per cent, marking the sixth-straight weekly advance, data out on Wednesday (Oct 18) showed. The rate on a five-year adjustable mortgage jumped 19 basis points to 6.52 per cent, the second-highest in MBA data back to 2011.

The index of home-purchase applications slid more than 5 per cent to the lowest level since 1995, while the refinancing gauge fell by the most since February.

Mortgage rates tend to move in tandem with Treasury yields. The 10-year note yield rebounded on Tuesday to the highest since 2007 after robust economic data indicated the Federal Reserve may have to boost interest rates again.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75 per cent of all retail residential mortgage applications in the US. BLOOMBERG