Mortgage Applications Increase Amid Rising Rates

Mortgage applications increased by 1.9% for the week ending July 17, according to the Mortgage Bankers Association (MBA). This rise was primarily fueled by a 6% increase in purchase activity, indicating that higher interest rates did not deter buyers as much as anticipated. Purchase activity also saw a modest 0.2% year-over-year gain, suggesting a growing responsiveness to market conditions.

Despite mortgage rates reaching an 11-month high of 6.69% for the week ending July 17, as calculated by the MBA, and 6.55% as of July 16 according to Freddie Mac, buyers continued to engage in the market. Mike Fratantoni, MBA's SVP and chief economist, noted that "growing home inventory in many markets is supporting more purchase activity." This suggests that an increase in available housing supply is a key factor counteracting the impact of elevated borrowing costs.

Refinance activity, however, experienced a 2% decline on the week, though it remained 7% higher than the previous year when rates were even more pronounced. The upward pressure on mortgage rates since March is linked to global oil price volatility stemming from the Iran conflict. Renewed hostilities and subsequent U.S. actions, including airstrikes and a naval blockade, have driven oil prices to their highest point since early June, reigniting inflation concerns. Fratantoni anticipates that "mortgage rates are likely to remain higher" due to these renewed inflation threats, even with recent data showing a drop in inflation for June.

The MBA's Market Composite Index, which measures total mortgage loan application volume, reflects this mixed trend. While purchase applications are showing resilience, the overall market dynamics are being shaped by geopolitical events impacting energy prices and, consequently, interest rates. Future data from Freddie Mac is expected to confirm a continued increase in mortgage rates, further solidifying the current lending environment.