Though applications for home loans fell last week as mortgage rates ticked up, the average loan to purchase a home reached an all-time high.
An index tracking applications to purchase homes dropped 5 percent, seasonally adjusted, last week from the prior week, according to the Mortgage Bankers Association. The metric was unchanged the week before.
But as home prices continue to soar as supply remains low and strong demand persists, homebuyers are seeking loans for record amounts. The average size of a purchase loan reached $402,200 last week, up from $398,600 the week before. That’s the highest in the MBA survey’s 30-year history.
Joel Kan, MBA’s head of industry forecasting, said the increasing loan sizes, plus a higher year-over-year volume of purchase applications, indicates that demand remains strong if a little diminished.
“Purchase applications cooled the first week of February, but homebuyers are still very active,” he said in a statement. “Purchase activity was 17 percent higher than last year.”
The MBA’s index tracking refinance applications also declined by 4 percent week over week. Kan noted that, similar to purchase loans, volume was up 46 percent compared to the same week in 2020.
Kan attributed the weekly declines in both indexes was largely due to mortgage rates increasing yet again as expectations for economic growth pick up momentum.
“Treasury rates have been driven higher by expectations of faster economic growth as the COVID-19 vaccine rollout continues,” he said. It’s the fourth time in six weeks that rates have ticked up.
The rate for a 30-year, fixed-rate mortgage was 2.96 percent, up from 2.92 percent the week before. It’s the highest rate since November, according to Kan. Jumbo rates dropped 1 basis point week-over-week to 3.11 percent.