Mortgage rates soared at the start of this week, with the 30-year fixed average climbing to 7.14% on Tuesday, marking the highest level since July 2024. This surge in rates follows a spike in yields that was both immediate and relatively contained. Despite the rise in rates, applications to refinance home loans saw a surprising increase of 2% from the previous week, although they remained 6% lower than the same period last year. This uptick in refinance applications was primarily driven by an increase in VA refinances, which continue to experience significant weekly fluctuations.
Conversely, applications for mortgages to purchase homes fell by 7% for the week, contributing to an overall decrease in total mortgage application volume by 3.7% compared to the previous week. Notably, purchase applications were down 15% from the same week one year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances also saw an increase, reaching 6.99%. However, the points for these mortgages decreased to 0.68.
"Purchase applications declined for both conventional and government loans and dropped to the slowest weekly pace since February 2024," said Joel Kan, vice president and deputy chief economist at the MBA.
The rise in mortgage rates marks the fourth consecutive week of increases, with the average contract interest rate for 30-year fixed-rate mortgages now standing 18 basis points higher than it was a year ago. Despite the higher rates, VA refinances have contributed to the rise in refinance applications, demonstrating their resilience amidst fluctuating market conditions.
"Refinance applications increased despite higher rates, but the increase was compared to recent low levels and was entirely driven by an increase in VA refinances, which continue to show weekly swings," noted Joel Kan.