A key measure of home-purchase applications rose again last week even as mortgage rates ticked higher.
The Mortgage Bankers Association's (MBA) index of mortgage applications rose 3.7% for the week ended Jan. 19, compared with one week earlier, according to new data published Wednesday.
The data also showed that the average rate on the popular 30-year loan started the year at 6.78%. While that is down from a peak of 8% in October, it is slightly higher than it was the previous week.
"Mortgage rates increased slightly last week, but there continues to be an upward trend in purchase activity," said Joel Kan, MBA's deputy chief economist.
CREDIT CARD DEBT RISING IN DOUBLE-EDGED SWORD FOR THE ECONOMY
The rise in mortgage rates has done little to cool housing demand at the start of the new year. Applications for a mortgage to purchase a home climbed 8% from one week earlier, although volume is down 18% compared with the same time last year.
However, demand for refinancing moved lower last week, falling 7% from the previous week, according to the survey. Compared with the same time last year, refinance applications are down about 8%.
"Refinance applications declined over the week and remained at low levels," Kan said. "There is still little incentive for homeowners to refinance with rates at these levels."
MORTGAGE RATES CONTINUE TO HOVER NEAR HIGHEST LEVEL SINCE 2000
The interest rate-sensitive housing market cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign. Policymakers lifted the benchmark federal funds rate 11 consecutive times over the past two years in an attempt to crush stubborn inflation and slow the economy.
However, many economists believe the central bank is done raising interest rates, which has helped to bring down painfully high mortgage rates.
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Higher rates have not only dampened consumer demand over the past year, but also severely limited inventory. That is because sellers who locked in a low mortgage rate before the pandemic have been reluctant to sell with rates continuing to hover near a two-decade high, leaving few options for eager would-be buyers.
Available home supply remains down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, according to a separate report published by Realtor.com.
