Mortgage lenders see increase in applications from week earlier before ‘rates go even higher’
Average purchase loan size increased to $441,100 due in large part to low inventory levels
Mortgage lenders in the US saw a 12% increase in applications from a week earlier — with the average contract interest rate for 30-year fixed mortgages increasing to 3.86% from 3.69%, according to the Mortgage Bankers Association.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, pointed out that refinance applications were up 18% with homeowners "trying to secure a refinance before rates go even higher."
About 57.3% of the applications were to refinance their current loans, which was about a 2% jump from last week.
A sign sits outside a home for sale in the 16th Street Heights neighborhood of Washington, D.C. (Andrew Harrer/Bloomberg via Getty Images / Getty Images)
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He said the average purchase loan size increased to $441,100 due in large part to low inventory levels and "swift home-price growth" that continues to push these loans higher.
A residential home loan application in San Francisco. (David Paul Morris/Bloomberg via Getty Images)
Investors expect the Federal Reserve to begin raising interest rates in March to fight inflation. Ultra-low rates and other stimulus helped markets recover from the initial shock of the coronavirus pandemic, and then supported stunning gains in the stock market.
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Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors, told bankrate.com that she believes mortgage rates will continue to rise in February while inflation-- that was once called transitory--- will remain elevated "as the Fed likely won’t raise interest rates in the next couple of months."
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"Remember that when inflation rises, lenders demand higher interest rates as compensation for the decrease in purchasing power. Thus, I expect the 30-year fixed mortgage rate to average 3.5 percent in February versus 2.7 percent for the 15-year fixed rate," she said.
The Associated Press contributed to this report