Last week, mortgage rates rose once again, leading potential buyers to step back at a time when the spring housing market should be flourishing. The Mortgage Bankers Association’s seasonally adjusted index showed that mortgage applications for home purchases dropped by 6% compared to the previous week. 

Additionally, the volume was down by 44% from the same week one year ago, and is currently at the lowest point in 28 years. This occurred as the average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) rose to 6.71% from 6.62%, with points increasing to 0.77 from 0.75 (including the origination fee) for loans with a 20% down payment. This marks the highest rate since November of last year. Over the past month, mortgage rates have risen by 50 basis points, whereas rates were in the 4% range in February of last year.

Joel Kan, an economist at MBA, said that data related to inflation, employment, and economic activity have indicated that inflation may not be decreasing as quickly as expected, which has led to an increase in interest rates. According to Kan, applications to refinance a home loan dropped by 6% for the week and were down by 74% compared to the previous year. He added that refinance applications make up less than a third of all applications and are lagging by more than 70% compared to the same period last year, indicating that the majority of homeowners have already locked in lower rates.

Although mortgage rates have not shown much movement at the beginning of this week, it appears that they are now trending upwards after a brief decline in January. The brief dip in rates at the start of the year led to a surge in homebuying, but the decrease in mortgage demand from homebuyers indicates that the spring housing market may be slow.