Mortgage rates jumped to their highest level in more than a year on Thursday, Feb. 8, continuing an ascent that kicked off at that the start of 2018. According to Freddie Mac, the average 30-year fixed-rate mortgage rate increased 10 basis points to 4.32% for the week ending Feb. 8 and is up more than 30 basis from the beginning of this year. The mortgage rate on the 15-year fixed-rate mortgage increased to 3.77% for the week, up from 3.68%, while the five-year adjustable-rate mortgage was at 3.57%, marking an increase of four basis points from last week.
Despite the increases in rates, or because of them, the Mortgage Bankers Association (MBA) reported that mortgage applications increased 0.7% for the week ending Feb. 2. In its Weekly Mortgage Application Survey, which measures loan application volume, the MBA said that volume increased 0.7% on a seasonally adjusted basis compared with the week earlier. On an unadjusted basis, it increased 4% compared with the previous week. The Refinance Index jumped 1% from the previous week, while the seasonally adjusted Purchase Index remained flat with the prior week. The unadjusted Purchase Index increased 7% compared with the previous week and was 8% higher in the same week last year.
Figure out how much home you can afford with our mortgage calculator.
With interest rates going higher, it is not surprising that the refinance share of mortgage activity declined to 46.4% of all the applications, marking the lowest level since July, when it was at 47.8%. The ARM share of mortgage applications jumped to 6.1% of all applications, the MBA said. While Freddie Mac said that it is too early to say if rising mortgage rates will hurt the momentum in the housing market, it did point to the increase in mortgage applications in the week ending Feb. 2 as something positive.
With mortgage rates increasing, fears are starting to reverberate through the market that the spring real estate season could be harmed. After all, many of those who buy homes in the spring are first-time buyers and are very sensitive to price. If rates continue to march higher, it may shut some buyers out of the market.
For the week ending Jan. 4, Freddie Mac reported that the average mortgage rate on a 30-year fixed rate mortgage was 3.95%. With the rate now at 4.32%, the cost of borrowing over the life of the loan has increased significantly. The uptick in applications for the week ending Feb. 2 could be a move on the part of would-be buyers to lock in rates out of concerns that they could go higher. Even though mortgage rates are still low from a historical perspective, Americans have gotten used to low rates over the past few years and may balk at paying what they perceive to be a heightened interest rate.