Numbers: Mortgage applications jumped as US homebuyers sought to catch up after the holiday seasons, despite rising interest rates.
Rising mortgage rates have not dampened demand for home purchases and refinancing. The overall market composite index — a measure of the volume of mortgage applications — rose last week, according to the Mortgage Bankers Association (MBA) on Wednesday.
The market index rose by 9.9% to 190.6 for the week ending January 5 compared to last week. A year ago, the index reached 186.7.
Key details: Home purchasing and refinancing activity rose despite interest rates rising several percentage points.
Buyer demand increased as consumers saw an opportunity to purchase after the holiday period. The purchase index – which measures mortgage applications to purchase a home – rose 5.6% from last week.
On the other hand, refinancing activity increased. The refinancing index rose 18.8%, with refinancing of government-backed loans in particular up nearly 30%.
The average contract rate for a 30-year mortgage for homes sold for $726,200 or less was 6.81% for the week ending January 5. This is up from 6.76% from the previous week.
The rate for jumbo loans, or 30-year mortgages for homes sold for more than $726,200, was 6.98%, up from 6.86% the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration rose to 6.56% from 6.51%.
The yield on 15-year bonds rose to 6.41% from 6.26% the previous week.
The adjustable rate mortgage rate rose to 6.17% from 5.71% last week.
The Big Picture: Pent-up demand from the holiday season likely pushed refinancing demand higher, as some homeowners may have seen lower mortgage rates as an opportunity.
But demand for home purchases has risen only modestly, and with interest rates rising, it is not clear whether interest rates will continue to rise.
However, as homeowners continue to experience low interest rates, even if homebuyers are willing to tolerate low interest rates, housing stock remains constrained.
What did the MBA say?“The increase in purchase and refinancing applications for both conventional and government loans is promising to start the year but is likely due to some catch-up in activity after the holiday season and lower interest rates at the end of the year,” said Joel Kahn, vice president and deputy chief economist at MA. Business management in a statement.
“Mortgage rates and applications have been volatile in recent weeks, and overall activity remains subdued,” he added.
Market reaction: The yield on 10-year Treasury bonds
It was more than 4% in early morning trading on Wednesday.
