Mortgage applications rose last week, even as mortgage rates remain stubbornly high, an indication that at least some buyers are determined to move forward with a home purchase in one of the most challenging markets in decades.
For the week ending September 15, the total number of applications — which includes those for loans to purchase a home and to refinance an existing loan — increased 5.4% from one week earlier, according to data from the Mortgage Bankers Association.
“Mortgage applications increased last week, despite the 30-year fixed-rate edging back up,” said Joel Kan, MBA’s vice president and deputy chief economist.
Mortgage rates have been over 7% since mid-August and lingered there as investors wait to hear from Federal Reserve Chair Jerome Powell about the future path of interest rates at his press conference following the conclusion of the Fed’s policy meeting on Wednesday.
The number of applications from would-be homebuyers rose 2% on a seasonally adjusted basis from a week before, but remained 26% lower than a year ago as homebuyers continue to face higher rates and limited inventory of homes for sale, Kan said.
In addition to those challenging conditions, homebuyers now also have to contend with rising home prices in some markets. This pushed the average loan size on a purchase application to $416,800, the highest level in six weeks, according to the report.
The increase in total mortgage applications was driven higher by a surprise increase in applications to refinance a mortgage. Refinance applications climbed 13% from the previous week, but were still almost 30% below the same week one year ago.
Mortgage rates and refinance trends usually go in opposite directions — when rates go up, refinancing goes down. Typically, homebuyers apply to refinance their loan when rates are lower than their current rate, as a way to reduce their monthly payment.
Over 90% of current homeowners with a mortgage have rates at 6% or lower, according to data from Black Knight, making the incentive to refinance at 7% or higher a nonstarter.
Since rates have spiked over the past year the number of refinances has fallen off a cliff.
The MBA noted that this week’s data is compared to the prior week’s data, which included an adjustment for the Labor Day holiday.
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