With mortgage rates beginning to rise, many Americans are jumping into the market before they have a chance to go even higher — and they are willing to pay more for homes than they ever have before.
Mortgages to purchase a home climbed 8% week-over-week during the seven days ending Jan. 14, according to the Mortgage Bankers Association’s (MBA) latest Weekly Mortgage Applications Survey, released on Wednesday. Overall mortgage applications increased 2.3% on a seasonally adjusted basis.
The uptick in activity came as mortgage rates hit their highest level in nearly two years amid moves by the Federal Reserve to slow its purchase of assets with the goal of raising interest rates in 2022.
The 30-year fixed-rate reached 3.64% during the week and has increased more than 30 basis points over the past two weeks, according to Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Despite the rise in rates — or maybe because of them — purchase applications climbed 8% during the week, with conventional purchase applications accounting for much of the activity. The average loan size for a purchase application set a record at $418,500.
Many prospective home buyers might want to enter the market now before rates get too high. But the higher asking prices are still freezing a lot of people out, primarily those shopping for their first homes.
“The continued rise in purchase loan application sizes is driven by high home-price appreciation and the lack of housing inventory on the market — especially for entry-level homes,” Kan said in a press release. “The slower growth in government purchase activity is also contributing to the larger loan balances and suggests that prospective first-time buyers are struggling to find homes to buy in their price range.”
Meanwhile, higher rates might have contributed to a slowdown in refinances. The refinance share of mortgage activity decreased to 60.3% of total applications from 64.1 percent the previous week, the MBA said. The Refinance Index, a measure of refinance application volume, decreased 3% from the previous week and 49% from the same week a year earlier.
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This article originally appeared on GOBankingRates.com: Mortgage Purchase Applications Jump 8% and Loan Sizes Hit a Record as Rates Begin to Rise