Volatility in the housing market has produced an oddity: mortgage rates and mortgage demand increasing side-by-side.
The average contract interest rate for a 30-year fixed-rate mortgage last week was 6.25 percent, according to the Mortgage Bankers Association’s weekly survey. The rate jumped 24 basis points from the previous week’s 6.01 percent average to mark the highest in nearly 14 years.
As rates reached new heights, the report showed a surprising confluence in the market as the rise accompanied an uptick in demand.
Applications increased 3.8 percent from the previous week for the period ending Sept. 16. It was the first increase in demand in six weeks.
Joel Kan, an executive with the MBA, cited volatility in the market as a factor for the bump in demand, despite the rate increase.
“As with the swings in rates and other uncertainties around the housing market and broader economy, mortgage applications increased for the first time in six weeks but remained well below last year’s levels,” Kan said in a release.
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Homebuyers could be forecasting a deeper mortgage rate increase in the near future. Mortgage rates typically — though not always — rise when the Federal Reserve raises interest rates, which it is expected to do during its Wednesday meeting.
Still, activity remains well below last year’s levels. Purchase applications are down 30 percent year over year, while refinancing activity is down 83 percent.
Refinancing accounted for more than 32 percent of mortgage applications last week. The adjustable-rate mortgage share of activity, meanwhile, remained steady with a 9 percent share of total applications.
The average contract interest rate for a 30-year fixed-rate mortgage with a jumbo loan balance — greater than $647,200 — increased to 5.79 percent. The average contract interest rate for 15-year fixed-rate mortgages increased to 5.40 percent.
Buyers are still grappling with mortgage rates that hit record lows during the start of the pandemic, leading to a frenzied housing market, only for them to swing back up as the Fed hiked interest rates to slow inflation, sidelining some buyers.