Mortgage rates have reached their highest peak in over a year, threatening affordability for potential homebuyers in an already pricey housing market. The average contract interest rate for 30-year fixed-rate mortgages rose from 3.52% to 3.33% last week, the highest rate since March 2020, CNBC reports. The increase came after the Federal Reserve signaled a tighter policy ahead, an announcement which pushed U.S. Treasury yields higher. As a result, applications to refinance a home loan fell 0.1% from the previous week and were 50% lower year-over-year, reaching the lowest level in more than a month.
Mortgage rates have moved to their highest level in more than a year, and that may have potential homebuyers nervous that their affordability window is closing faster than expected. Home prices are still gaining, and winter is historically the slowest season for the housing market, but mortgage demand from buyers moved higher.
Last week purchase loan application volume rose 2% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This jibes with anecdotal comments from real estate agents that they are seeing higher-than-normal early January demand. Applications were still 17% lower than the same week one year ago, but some of that is due to much lower supply in the market. Supply usually increases in December, but it did not last month.