By Richard Leong
NEW YORK (Reuters) - U.S. homeowners and potential buyers are feeling the sting from the global bond market sell-off stemming from Donald Trump's stunning U.S. presidential victory as mortgage rates posted their biggest weekly rise in 3-1/2 years.
A measure of U.S. mortgage application activity fell to a 10-month low as 30-year mortgage rates jumped to their highest levels since January, data from the Mortgage Bankers Association released on Wednesday showed.
A deceleration in mortgage activity would not only be felt in the housing market, but also banks and other home-related industries, posing a drag on the overall economy.
"I would expect a slowdown into the first half of next year if rates don't fall," said Doug Duncan, chief economist at mortgage finance agency Fannie Mae <FNMA.OB>.
It is too early to say whether the housing sector faces a protracted decline from rising borrowing costs, but the recent jump in mortgage rates will likely put a brake on home purchases and refinancing into year-end, analysts said.
"It gives potential homebuyers pause. No one would be in a hurry to buy," said Greg McBride, chief financial analyst at Bankrate.com in West Palm Beach, Florida.
Mortgage rates recorded their steepest weekly increase since June 2013 during the "taper tantrum" with traders dumping bonds worldwide in reaction to Trump's surprise U.S. presidential win on Nov. 8.
Traders are jittery about a surge in inflation, which erodes bond values, if Trump pushes for the types of tax cuts and federal spending he campaigned for, analysts said.
To be sure, bond yields and mortgage rates could fall if Trump ends up choosing a less aggressive fiscal path, according to McBride.
The Washington-based MBA's mortgage market index fell 9.2 percent to 436.3 in the week ended Nov. 11, which was the lowest level since the week of Jan. 15.
Interest rates on 30-year fixed-rate mortgages with conforming loan balances of $417,000 or less averaged 3.95 percent, which was the highest since January, MBA said.
Average interest rates on shorter-term mortgages rose to their highest levels since March, it said.
MBA's weekly measure on application activity for refinancing fell last week 10.9 percent to 1,810.1, its lowest level since March, while its weekly gauge on loan requests to buy a home, which is seen as a proxy on future home sales, decreased 6.2 percent to 197.0, its lowest level since January.
(Reporting by Richard Leong; editing by Chizu Nomiyama and Tom Brown)