New data from the Mortgage Bankers Association of America (MBA) showed mortgage demand continues to drop as the calendar turns to November. A major contributor to the pullback in demand has been a rise in mortgage rates. Relatively strong economic results have quelled expectations that the US Federal Reserve Board (Fed) will aggressively cut interest rates, which has helped push yields higher in recent weeks.

• Mortgage applications in the US tumbled by 10.8% over the week ended November 1. This was the sixth consecutive week of falling mortgage applications amid higher mortgage rates. Applications to purchase a home and for refinancings both dropped at a relatively sharp pace over the week.
• US consumers are still facing tight financial conditions combined with elevated home prices, which is pulling down demand for mortgages. The MBA says the rate on a 30-year fixed-rate mortgage was 6.81% over the week ended November 1, up from the 6.73% rate in the previous week.
• The Fed reduced its federal funds rate by 50 basis points (bps) at its September meeting, raising hopes it could aggressively reduce rates. However, economic data has been relatively robust since that meeting leading many to believe the Fed will take a more gradual approach to loosening monetary policy.
• Investors are also considering how Fed actions might be impacted by the US election. Republican Donald Trump is preparing to serve his second term as US President.

The Fed makes its interest-rate announcement today. A Bloomberg survey shows economists are expecting a 25-bps-rate cut. While certain areas of the US economy remain strong, real estate activity has been relatively soft. The Fed will need to be mindful of this key component of the US economy as it makes its upcoming rate decisions.

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