Last week saw a significant divergence in mortgage interest due to higher mortgage rates. The market is seeing homebuyers rush into it, even though refinance continues to be scarce. The Mortgage Bankers Association’s seasonal adjusted index shows that total mortgage application volumes rose 2.3% in the past week.

For loans with 20% downpayment, the average 30-year fixed-rate interest rate on mortgages has increased from 3.52% to 3.64%. The rate was 72 base points higher than that of the previous week and increased over 30 basis points during the last two weeks.

The week ended with a drop in applications to refinance home loans. These are sensitive to rate movements and were 33% lower this week than they were a year ago. From 64.1% last week, the refinance portion of mortgage activity declined to 60.3%.

“Mortgage rates reached their highest point since March 2020. This led to the slowest rate of refinance activity over two years. Joel Kan (MBA’s Associate Vice President of Economic and Industry Forecasting) stated that most of the slowdown in refinance was due to VA and FHA mortgage refinances.

However, mortgage applications from homebuyers rose 8% in the past week. They were 13% higher than one year ago. It appears that activity is concentrated at the top end of market because there are more buyers. Record-breaking $418,500 was the average size of a loan for purchase applications.

Kan stated that “the slower growth of government purchases activity is also contributing towards the higher loan balances.”

The demand for housing is strong as the supply of homes did not rise as much as usual in December. Some buyers are taking advantage of the busy spring market to secure lower rates.

Paul Legere, who is a buyer’s representative with The Joel Nelson Group, Washington, D.C., calls this activity “unprecedented.”

Legere said that some lenders he works with claim they have received more homebuyer applicants in the past few weeks than in any 20-year period. He also stated that he had just written an offer for a $1.3million home and included an escalation clause of up to $1.625M.