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    US mortgage applications fall by 0.5% as rates rise slightly to 6.69%

    by VT Markets
    /
    Aug 27, 2025
    US MBA mortgage applications decreased by 0.5% for the week ending August 22, after a previous drop of 1.4%. The market index fell to 275.8 from 277.1. The purchase index increased to 163.8 from 160.3, showing more activity in home purchases. On the other hand, the refinance index dropped to 894.1 from 926.1, indicating less refinancing activity.

    Mortgage Rate and Application Trends

    The 30-year mortgage rate climbed slightly to 6.69% from 6.68%. Generally, mortgage applications and rates often move in opposite directions. This week’s mortgage data gives us a mixed view. While applications decreased a bit, the rising purchase index indicates that demand for housing is holding steady despite high rates. This suggests buyers are adapting to interest rates around 6.7%. This situation occurs alongside slightly easing inflation. The July 2025 CPI report shows core inflation at 3.1%, down from 3.3% the previous month. However, recent comments from the Federal Reserve suggest they are not ready to change their policies. Thus, the current market’s expectations for large rate cuts may be too optimistic.

    Potential Strategies in Housing Market

    This situation could present an opportunity in options on homebuilder ETFs like ITB or XHB. The steady demand for purchases might support these stocks, making it attractive to sell out-of-the-money puts to earn premium. We might also explore strategies that bet on low interest rate volatility in the short term, as the Fed appears to be maintaining their current stance. This scenario resembles the market activity in late 2023, when a brief dip in mortgage rates below 7% sparked a quick rise in buying activity. It highlights the strong demand that could rapidly emerge if rates fall decisively. This supports the idea that any hint of a Fed policy change could lead to a significant reaction in housing-related assets. Create your live VT Markets account and start trading now.

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