The surge in mortgage rates has tempered the excitement of American homebuyers, evident in the steep drop in mortgage purchase applications over the last seventeen weeks. This decline has led to the lowest levels seen since February 1995, as reported in Wednesday’s data.Sources: Bloomberg, MBAAccording to the Mortgage Bankers Association (MBA), for the week ending October 20, 2023, mortgage purchase applications decreased by 2.2% on a seasonally adjusted basis from the previous week (v -5.6% prior). The index was down 25.4% over the past seventeen weeks. It reached the lowest level since February 1995.The decrease in purchase activity can be attributed to various factors, notably including the soaring mortgage rates and limited inventory. On Wednesday, data revealed a 20 basis points rise in the fixed-rate for 30-year mortgage agreements, now standing at 7.9%. This is the highest it has been since 2000, marking the seventh consecutive week of increases, totaling 69 basis points. Additionally, the rate for a five-year adjustable mortgage saw substantial growth, climbing from 6.52% to 6.99%. This is the second-highest recorded rate in MBA data since 2011.Separately, on Wednesday, Bankrate.com data showed 30-year mortgage rates reached 8.09%, the highest rate since June 2000. Mortgage rates tend to loosely track the yield on the 30-year U.S. TreasuryThis situation is expected to have a significant effect on closed sales from October to December. In September, existing home sales dropped to the lowest point since 2010, in line with my forecast. According to data from the National Association of Realtors released on Thursday, contract closings declined by 2% compared to the previous month, reaching an annualized pace of 3.96 million. Yet, this figure slightly exceeded the median estimate of 3.89 million as per a Bloomberg survey of economists.It comes as other housing data point to weakness. In October, the sentiment among US homebuilders reached its lowest point in nine months. The National Association of Home Builders/Wells Fargo index dropped for the third straight month. Measures evaluating both present and anticipated sales, along with a gauge of potential buyer traffic, also hit their lowest levels since the beginning of the year.More By This Author:German Housing Sector Grapples With Unprecedented Crisis Eurozone Monetary Developments In August Raise Fears Of A Recession Existing Home Sales On Track To Reach A 13-Year Low