A sudden surge in home purchases just as the holiday season gets underway is driving up mortgage demand. The Mortgage Bankers Association seasonally adjusted index showed that the volume of total mortgage applications increased 1.8% last week.

This increase was driven largely by the number of applications for homes, which rose 5% over the previous week, but were still lower than the prior year. This was the third consecutive weekly increase.

As mortgage rates are expected to rise even more than in the last month, buyers may rush in at the slow holiday season. Some buyers may be priced out due to the high cost of homes today. 

Joel Kan (an MBA economist) stated that “both conventional and government loan requests increased” and that the average size of a purchase loan was now at $407,200. He continued its trend to be above $400,000 in 2021. 

For the past month, mortgage rates have risen steadily and this trend has continued into last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.24% from 3.20%, with points decreasing to 0.36 from 0.43 (including the origination fee) for loans with a 20% down payment. 

Mortgage applications to refinance a home loan were essentially flat, rising just 0.4% from the previous week. They were 34% lower than the same week one year ago when rates were 32 basis points lower. 

In light of current high-inflation and growth conditions, the Federal Reserve’s policy will be interpreted by the financial markets as they continue to determine its future direction. Kan, MBA associate vice president for economic and industry prediction, said that although there were some rate fluctuations last week mortgage rates were still higher. “Borrowers are continuing to lock down mortgages, anticipating higher future rates.”

Refinance activity has increased to 63.1%, up from 62.9% in the week before. 

According to Mortgage News Daily, mortgage rates moved higher this week. They are more than 10 basis point higher than last Friday. The rates are at their highest since April last year.