Mortgage demand grows despite higher rates

Mortgage applications posted a modest gain for the week ending April 21, according to the Mortgage Bankers Association.

MBA's weekly survey revealed home loan applications rose 3.7% on a seasonally adjusted basis – 5% when unadjusted – from the previous week. The increase comes despite a 12 basis-point rise in the average contract interest rate for the 30-year fixed mortgage, up to 6.55%.

Refinance application volume increased 2% week over week, and purchase activity jumped 5% from a week earlier.

"Both conventional and government home purchase applications increased last week. However, activity was still nearly 28% below last year's pace, as high mortgage rates and low supply have slowed the market this year, even as home-price growth has decelerated in many markets across the country," said Joel Kan, MBA's deputy chief economist. "Refinance applications also increased last week but remained at half of last year's levels."

Of total mortgage applications, the refinance share of mortgage activity decreased from 27.6% to 26.8%, while the adjustable-rate mortgage share of activity grew to 6.7%. The share of FHA, VA, and USDA loans all fell during the week, down to 12.6%, 11.2%, and 0.4%, respectively.

"Although incoming data points to a slowdown in the U.S. economy, markets continue to expect that the Fed will raise short-term rates at its next meeting, which have pushed Treasury yields somewhat higher," Kan noted. "As a result of the higher yields, mortgage rates increased for the second straight week to their highest level in over a month, with the 30-year fixed rate now at 6.55%."

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