Potential homebuyers may be concerned that mortgage rates are at their highest point in over a year. This could make them nervous about their ability to afford a house. While home prices continue to rise, the winter season is traditionally the least active for the housing market. However, buyers are now more interested in mortgages.

The seasonally adjusted index by the Mortgage Bankers Association shows that last week’s purchase loan volume increased by 2.2%. These numbers are consistent with real-world comments by agents that they have been experiencing higher-than-normal January demand. While applications are still lower than they were one year ago, this may be due to a lower market. Although supply usually rises in December, it didn’t last month.

The average 30-year fixed rate mortgage interest rate with conforming loan amounts ($647,200 and less) has increased to 3.52%. Points have decreased to 0.45 (including the origination fees) for loans that require a 20% downpayment. It is now the highest rate for a 30-year fixed-rate mortgage since March 2020. The same week last year, it was 64 basis point lower.

Joel Kan, an MBA economist said that mortgage rates rose across all types of loans last week due to the Federal Reserve signalling tighter policy. This pushed U.S. Treasury yields up. The housing market began 2022 with a positive note. The increase in both government and conventional purchase applications was evident with FHA applications rising almost 9% and VA applications growing more than 5%.

FHA loans and VA loans have low down payments and are often preferred by first-time home buyers.

The number of applications to refinance home loans fell by 0.1% in the past week, and was 50% less than the same week a year ago. The refinance volume has dropped to its lowest point in over a year. Refinances are becoming less attractive as mortgage rates increase.

According to Mortgage News Daily Mortgage rates rose dramatically on Monday, but fell slightly Tuesday.

“It is important to ask whether it is possible for the rates to rise abruptly. It is possible to answer this question with a definitive “maybe!” Matthew Graham, Chief Operating Officer at Mortgage News Daily, suggested that it might be “probably.” “Unfortunately this doesn’t mean rates won’t rise, but it does suggest that there may be a slowdown in the rate of change.”