Interest rates for fixed rate mortgage products shot up by at least a dozen basis points during the week ended January 14, still the volume of purchase mortgages rose significantly and, while refinancing declined, it still accounted for the bulk of application activity. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of mortgage loan application volume, i ncreased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index rose 3 percent. The Refinance Index did fall 3 percent compared to the week ended January 7 and was 49 percent lower than the same week one year ago. The refinance share of mortgage activity slipped to 60.3 percent of total applications from 64.1 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index jumped by 8 percent from the prior week and was up 14 percent before adjustment. Applications were down 13 percent year-over-year. [purchaseappschart] “Mortgage rates hit their highest levels since March 2020 , leading to the slowest pace of refinance activity in over two years. The 30-year fixed rate reached 3.64 percent and has increased more than 30 basis points over the past two weeks. FHA and VA refinance declines drove most of the refinance slowdown,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Despite the increase in rates, purchase applications jumped almost 8 percent, with conventional purchase applications accounting for much of the stronger activity. The average loan size for a purchase application set a record at $418,500. The continued rise in purchase loan application sizes is driven by high home price appreciation and the lack of housing inventory on the market – especially for entry-level homes. The slower growth in government purchase activity is also contributing to the larger loan balances and suggests that prospective first-time buyers are struggling to find homes to buy in their price range.”  
Source: Mortgage News Daily