U.S. Mortgage Applications Show Modest Increase Amidst Rising Rates

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# U.S. Mortgage Applications Show Modest Increase Amidst Rising Rates

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Introduction

In the face of rising mortgage rates, home-buying demand remains strong as evidenced by the latest numbers released by the Mortgage Bankers Association (MBA). The market composite index, a key measure of mortgage application volume, experienced a 3.7% increase in the past week, signaling continued interest in purchasing homes.

Key Details

Purchase Index

The purchase index, which gauges mortgage applications for home purchases, saw a notable rise of 7.5% compared to the previous week.

Refinance Index

Conversely, the refinance index fell by 7%, as homeowners found little incentive to refinance their mortgages.

Average Contract Rates

  • Homes Sold for $726,200 or Less: The average contract rate for a 30-year mortgage was 6.78% for the week ending January 19, slightly higher than the previous week’s rate of 6.75%.
  • Jumbo Loans (Homes Sold for over $726,200): The average contract rate for a 30-year mortgage increased to 6.94% from the previous week’s rate of 6.86%.
  • Federal Housing Administration (FHA) Backed Mortgages: The average rate for a 30-year mortgage backed by the FHA rose to 6.51% from 6.46%.
  • 15-Year Mortgages: The average rate for a 15-year mortgage rose to 6.31% from 6.24%.
  • Adjustable-Rate Mortgages: The rate for adjustable-rate mortgages increased to 6.22% from last week’s rate of 6.14%.

The Big Picture

Although mortgage rates may fluctuate, the overall trend indicates an increasing interest in home-buying. However, due to lower inventory levels, it is likely that both mortgage applications and sales will be somewhat limited. Additionally, the unattractive nature of refinancing persists, as many homeowners currently enjoy lower mortgage rates than what is currently available.

Insights from the MBA

According to Joel Kan, Vice President and Deputy Chief Economist at the MBA, the increase in mortgage applications last week was primarily driven by conventional and FHA purchase applications. Some buyers have taken early action this season to secure favorable rates and deals.

Market Reaction

In early morning trading on Wednesday, the yield on the 10-year Treasury note (BX: TMUBMUSD10Y) exceeded 4%.

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