Mortgage rates may be moving higher but eager buyers continue to drive loan applications to purchase a home higher as well. Mortgage applications to purchase a home rose 1% last week, the Mortgage Bankers Association reported Wednesday. Home shoppers may be rushing to lock in rates ahead of any further increases.
But higher mortgage rates are taking a toll on homeowners looking to refinance. Mortgage demand for refinance applications fell 15% last week. They are down 60% compared to a year ago.
“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve,” says Michael Fratantoni, the MBA’s chief economist.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances—those that are $647,200 or less—rose to 4.80% last week, the MBA reports. That is up from 4.50% the week before.
Housing affordability is weakening as mortgage rates climb. About 87.5 million households are unable to afford a median-priced new home, according to data from the National Association of Home Builders. If the new-home market prices were to rise by just $1,000, an additional 117,932 would be priced out. Read more: How Rising Mortgage Rates Hamper Affordability
Overall, mortgage application volume, for home purchases and refinances combined, decreased 6.8% last week.