Homebuyer Demand Perks Up Despite Rising Mortgage Rates
Mortgage rates continued to inch upward last week, dampening refinancing activity again but not applications for new mortgages.
The average rate for a 30-year fixed mortgage rose for the fifth straight week, ticking up 3 basis points to 3.26% in the week through March 5, according to the Mortgage Bankers Association. Meanwhile, an MBA index measuring mortgage applications for home purchases rose 7%, rebounding somewhat from a recent decline—despite the higher borrowing costs. The trade group’s refinance index decreased for the fourth week in the past five, dropping 5%.
The days of rock-bottom mortgage rates appear to be over after driving a real estate boom compounded by the need of many Americans to stay at home during the pandemic. But it remains to be seen how much rising costs will hurt interest in buying. Even amid a severe lack of homes for sale and soaring sale prices (which some predict are unsustainable,) demand among homebuyers seemed almost insatiable until recently.
Increasing optimism about the economic rebound, fueled by more government relief and the proliferation of vaccines to fight COVID-19, is pushing rates upward just as the spring buying season is about to begin. A separate measure of the average 30-year fixed mortgage, from Freddie Mac, rose 3 basis points to 3.05% this week.
“Signs of faster economic growth, an improving job market, and increased vaccine distribution are pushing rates higher,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a statement.
Still, purchase applications had their strongest showing in weeks, Kan said, and the size of loans fell, possibly signaling an increase in first-time buyers.