Mortgage application activity fell decisively in the wake of the presidential elections. While the week ending November 11 culminated with the Veterans Day holiday, the downturn appeared more related to the sharp increase in mortgage rates that followed the election than to the shortened work week.

The Mortgage Bankers Association's Market Composite Index, a measure of mortgage loan application volume, dropped 9.2 percent on a seasonally adjusted basis from the week ended November 4 and was down 10 percent unadjusted. 

The share of applications that were for refinancing decreased from 62.3 percent to 61.9 percent and the Refinancing Index declined 11 percent, reaching its lowest level since last March. The seasonally adjusted Purchase Index was down 6 percent, retreating to January 2016 levels. The unadjusted Purchase Index declined 10 percent from the prior week but was still 3 percent higher than during the same week in 2015.

"Following the election, mortgage rates saw their biggest week over week increase since the taper tantrum in June 2013, and reached their highest level since January of this year," said David H. Stevens, CMB, President and CEO of the Mortgage Bankers Association. "Investor expectations of faster growth and higher inflation are driving the jump up in rates, and rates have now increased for five of the past six weeks, spurring a commensurate drop in refinance activity."

Applications for FHA mortgages increased to a 12.2 percent share from 11.6 percent the previous week and the VA share rose to 12.6 percent from 12.3 percent. The USDA portion of application activity decreased to 0.6 percent from 0.7 percent.

Interest rates rose for all loan types on both a contract and effective basis.  The average contract interest rate for 30-year fixed-rate mortgages (FRMs) with conforming loan balances ($417,000 or less) rose to its highest level since January 2016, 3.95 percent, from 3.77 percent.  Points increased to 0.39 from 0.38  

The jumbo version of the 30-year FRM (loans larger than $417,000) had an average rate of 3.89 percent, the highest since last January.  Points eased back to 0.26.  The previous week the jumbo rate was 3.75 percent with 0.27 point.  

The average rate for 30-year FRMs backed by the FHA increased to 3.73 percent, from 3.61 percent, the highest level since April.  Points fell to 0.28 from 0.35.

Fifteen-year FRM rates jumped back to March 2016 levels with the contract rate at 3.15 percent with 0.29 point.  The previous week the rate was 3.03 percent with 0.38 point.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) was also at the highest level since March; 3.11 percent, up from 2.92 percent.  Points decreased by an average of 5 basis points to 0.42. The share of applications for ARMs increased to 4.7 percent from 4.5 percent.

MBA's Weekly Mortgage Applications Survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rates assume an 80 percent loan-to-value ratio and points that include the origination fee.