Home buyers are rushing to get mortgages before rates rise further.
Total mortgage applications, including refinancing, increased 3% during the week ended Nov. 18, reversing course from the prior week, driven by strong demand from home buyers.
Applications for mortgages to purchase homes soared 13% during the week ended Nov. 18 from a week prior, according to data released Wednesday by the Mortgage Bankers Association. That was also up 11% from a year ago and the biggest weekly increase since early January.
Refinances went the other way. Applications dropped 3% from a week prior, continuing a steady slide as rising mortgage rates have damped demand among existing homeowners.
The mortgage market has been shaken up since Donald Trump's election as president. Mortgage rates have risen by about half a percentage point, averaging 4.10% for 30-year fixed conforming loans on Tuesday, according to MortgageNewsDaily.com.
Late last week, mortgage rates hit 4.125%, the highest in 17 months. While still low by historical standards, the new rates are substantially higher for existing borrowers, many of whom locked in rates below 4% during the past few years. In early July, average rates on 30-year fixed mortgages were as low as 3.34%.
Interest rates have spiked several times since the housing downturn, only to fall again. But lenders are growing wary, citing President-elect Trump's fiscal policies as well as the Federal Reserve's likely move to increase rates as soon as December.
"From the facts that we see out there, it looks like rates are going to settleat a higher rate than they did in the last few years," said Greg Gwizdz, national sales manager for Wells Fargo Home Mortgage, a division of Wells Fargo & Co., the country's leading mortgage lender.
Rising interest rates over the long run will make more expensive homes less affordable for many borrowers, which could affect the rate at which home values have been appreciating in many markets.
The latest increase in purchase-mortgage demand was driven by borrowers seeking large mortgages. The average mortgage amount home buyers applied for last week reached $310,200, the highest in the MBA's survey, which goes back to 1990.
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(END) Dow Jones Newswires
November 23, 2016 08:35 ET (13:35 GMT)
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