While mortgage rates have been increasing since the beginning of this year, many buyers initially seemed unscathed. In fact, some were even eager to move in, before the rates rose. Buyers are now pulling back.

According to the Mortgage Bankers Association, mortgage applications for purchasing a house fell 10% last week when compared to the prior week. Seasonally adjusted, they were also 12% less than the year before. A record $446,000 was set for the average loan, which indicates that buyers tend to be at the high end of the market with comparatively greater supply.

The supply factor is also a major factor in the mortgage market. According to Realtor.com, January’s total home inventory was 28% lower than January last year. Also, new listings fell 9% for the second consecutive month. It is possible that this trend will continue through February since sellers aren’t necessarily rushing to the market.

“We expect buyers to have a busy year, and if the January housing trends indicate, it is heating up in 2022,” said Danielle Hale, chief economist at Realtor.com. According to Danielle Hale (Realtors.com chief economist), January saw record sales. This suggests that buyers are more active this time of the year than normal.

Average contract interest rates for 30-year fixed rate mortgages (with conforming loan balances of $647,200 or lower) rose to 3.83%, from 3.78%. Points decreased to 0.40, from 0.41 for loans with 20% down payments. One year earlier, the rate was 87 base points lower.

Joel Kan, MBA associate vice president for economic and industry forecasting said that “mortgage rates followed U.S. 10-year yields and other sovereign bonds” as the Federal Reserve (and other important global central banks) responded to increasing inflationary pressures.

Refinance applications for home loans fell by 7% over the past week, and they were 52% less than one year ago. Refinance applications now account for 56.2%, down from 57.3% in the week before. Refinances are now available to a smaller number of borrowers, which is about half the population that was one year earlier.