Applications for home mortgages are facing a mixed trend as interest rates reach their highest point since May 2024. According to the Mortgage Bankers Association's seasonally adjusted index, total mortgage application volume last week increased by 7% compared to the same period one year ago. However, applications for purchasing a home were 2% lower than the same week last year, and 34 basis points lower from the previous year. Meanwhile, refinancing applications saw a notable increase, rising by 22% over the same timeframe.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 7.09% from 6.99%, marking its highest level in several months. Points on these loans decreased slightly, moving from 0.68 to 0.65, which includes the origination fee for loans with a 20% down payment. Mortgage demand started this year on a stronger note compared to last year, despite these higher interest rates.
Joel Kan, MBA's vice president and deputy chief economist, noted the volatility in application volumes during this time of year.
"This time of the year is a particularly volatile time for application volumes, so it can be more helpful to focus on the level rather than the percent change," – Joel Kan
The rise in mortgage rates coincides with an increase in bond yields in both the U.S. and abroad. Concerns over a persistent inflation outlook and high budget deficits have contributed to this upward trend, pushing mortgage rates higher for the fifth consecutive week.
"Bond yields in the U.S. and abroad continued to move higher in response to concerns over a sticky inflation outlook and still too-high budget deficits, which pushed mortgage rates higher for the fifth consecutive week." – Joel Kan
This week's mortgage rates remain relatively stable at the start but may experience significant changes following the release of the Consumer Price Index on Wednesday. This latest inflation data could influence mortgage rates in either direction.