Homebuyers are still going strong.
An index that tracks mortgage applications to buy homes increased 3 percent, seasonally adjusted, last week, surpassing the prior week’s surge, according to the Mortgage Bankers Association’s survey.
The MBA metric, known as the purchase index, increased despite mortgage interest rates rising for the second week in a row.
The average 30-year, fixed-rate mortgage was 2.92 percent, up from the previous week’s 2.88 percent. It’s the highest rate since November, according to Joel Kan, MBA’s head of industry forecasting. Jumbo rates also ticked up, to 3.19 percent from 3.17 percent the prior week.
The average loan size for purchase applications jumped to $384,000, the second highest level in the 30-year history of MBA’s weekly survey. The prior week’s average loan size was $374,700.
“Homebuyers in early 2021 continue to seek newer, larger homes,” said Kan.
Rising rates might have pushed down refinance applications, however. The MBA index tracking requests to refinance dropped 5 percent last week from the previous week. Kan attributed the drop to rising rates caused by increasing yields on Treasury bonds, which mortgage rates historically follow.
“Market expectations of a larger than anticipated fiscal relief package, which is expected to further boost economic growth and lower unemployment, have driven Treasury yields higher the last two weeks,” he explained.
Last week, yields on 10- and 30-year Treasury bonds reached the highest levels since March.
The Treasury Department has begun flooding the market with long-term bonds, for which there has been little investor demand to date. That drives down bond prices, boosting yields. On Tuesday, however, Janet Yellen, President-elect Joe Biden’s Treasury secretary nominee, mentioned the idea of issuing 50-year Treasury bonds for the first time, prompting a sell-off in the bond market.