Mortgage Demand Rises by Nearly 10% Despite Interest Rate Increase
Mortgage rates experienced a slight increase for the second consecutive week, yet they still hover within a range that appeals to consumers. The Mortgage Bankers Association reported a 9.9% rise in total mortgage application volume last week, taking into account an additional adjustment for the New Year’s holiday, and the average contract interest rate for 30-year fixed-rate mortgages increased marginally to 6.81%.
Despite the modest rate increase, applications for home loan refinancing surged by 19% from the previous week, marking a 30% increase from the same period last year. While the 30-year fixed rate is higher than a year ago, it remains 26 basis points lower than it was four weeks ago. Concurrently, applications for home purchases rose by 6% for the week but remained 16% lower than the corresponding week last year. Buyers continue to grapple with limited housing supply and soaring home prices.
Joel Kan, an economist at the MBA, commented on the recent activity, stating that the increase in both purchase and refinance applications is a promising start to the year. However, he attributed the boost to some catch-up in activity following the holiday season and year-end rate declines, emphasizing the ongoing volatility in mortgage rates and applications. Despite challenges, real estate agents report a resurgence in demand from buyers who were previously deterred by the higher rate environment. Additionally, consumer expectations, as per a Fannie Mae report, indicate anticipation of further declines in mortgage rates.
While mortgage rates have seen a slight increase at the beginning of this week, they still reside in the 6% range. The release of the monthly consumer price index on Thursday is anticipated as a significant economic indicator that could influence mortgage rates, especially if it signals a need for further measures to curb inflation.