The Mortgage Bankers Association’s seasonally adjusted index reported a 6.5% increase in the total application volume for last week compared to the previous week.
Although the rates were higher, there was a 7% increase in mortgage applications to purchase a home for the week, but it remained 38% lower than the same week in the previous year. Additionally, applications to refinance a home loan climbed by 5% for the week but were 74% lower than the same week one year ago.
According to recent data, demand for mortgages increased for the second week in a row despite volatility in mortgage rates. The Mortgage Bankers Association’s seasonally adjusted index showed that total application volume rose 6.5% last week compared with the previous week.
Silicon Valley Bank Effect
While generally higher for most of the week, mortgage rates dropped sharply on Friday following news of the Silicon Valley Bank failure. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.71% from 6.79%, with points falling to 0.79 from 0.80 (including the origination fee) for loans with a 20% down payment.
However, mortgage rates bounced higher again on Tuesday after the release of the February consumer price index, which suggests that the Federal Reserve may raise interest rates again next week despite recent banking industry turmoil.
Despite the higher rates, mortgage applications to purchase a home increased by 7% for the week, although they were still 38% lower than the same week a year ago.
Homebuying Activity
Homebuying activity slowed down in early February after rates increased by about a full percentage point, but buyers appear to be returning now, possibly because of concerns about rates increasing further. The question remains, however, about how long this trend will last.
Applications to refinance a home loan increased by 5% from the previous week but were 74% lower than one year ago. This is likely due to the higher rates compared to last year.
Outlook
While mortgage rates have been volatile, demand for mortgages has been on the rise for the second week in a row. Mortgage applications to purchase a home have increased despite higher rates, and applications to refinance a home loan have also increased slightly. However, it remains to be seen whether this trend will continue, especially with the uncertainty surrounding interest rates and the banking industry.
