Potential homebuyers, as well refinancers are affected by rising mortgage rates. The Mortgage Bankers Association reported that the number of mortgage applications dropped 13.1% to its lowest level in a week. This is the lowest since December 2019. Refinance applications dropped by 15% each week and were 56% less than one year earlier.

Joel Kan, MBA associate vice president for economic and industry forecasting, stated, “Higher mortgage interest rates have quickly stopped refinances, with activity falling in six of the seven first weeks of 2022.”

For loans with at least 20% down, the average 30-year fixed-rate interest rate on mortgages has increased from 4.05% to 4.06%.

Due to higher mortgage rates, high home prices and limited inventory, applications for purchase of a house fell 10% per week. This is 6% less than the same time last year. It was the third consecutive week of declining purchase applications.

The MBA Weekly Survey found that the average purchase loan size didn’t rise, however, the median was $450,200. This is very close the record of $453,000 set by the survey in week end February 11.

The home prices continue to rise steadily, and this trend continued into 2021. The S&P CoreLogic Case-Shiller Home Price Index was released Tuesday, and 2021 registered the highest calendar-year increase in 34 years, according to Craig J. Lazzara, managing director at S&P DJI. Nationally, prices increased 18.8% in 2021 as compared to a 10.4% increase in 2020.

Some buyers will face higher mortgage rates, which could lead to less buyer demand. Lazzara believes that prices will slow down as a result of rising rates.

Lazzara stated that “we have suggested previously that the strength of the U.S. residential market is due in part to a change in locatal preferences as households respond to the COVID panademic.” It will take more data to determine whether the demand surge is simply an acceleration in purchases over several years, or a permanent and lasting secular change. “In the meantime, we should soon start to see the effect of increasing mortgage rates upon home prices in the short-term,” he stated.