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Nov. 16, 2019, 10:44 a.m. EST

Mortgage rates are increasing again — so why did more people apply for home loans?

On average, the 30-year fixed-rate mortgage now comes with a rate of 3.75%

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By Jacob Passy


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More households are looking to open the door to a new home, even though rising mortgage rates are making that a more expensive proposition.

Although mortgage rates now stand higher than they did just a couple months ago, more people are applying for loans to buy homes.

The 30-year fixed-rate mortgage averaged 3.75% during the week ending Nov. 14, up six basis points from the previous week, Freddie Mac /zigman2/quotes/202741363/composite FMCC +0.90%   reported Thursday . Last week, mortgage rates had fallen after three straight weeks of increases.

Still, mortgage rates remain much lower than where they stood a year ago. During this same week last year, the 30-year fixed-rate mortgage averaged 4.94%.

The 15-year fixed-rate mortgage rose seven basis points to an average of 3.2%, according to Freddie Mac. The 5/1 adjustable-rate mortgage averaged 3.44%, ticking up five basis points from a week ago.

Mortgage rates generally track the direction of the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.48% . Though the 10-year Treasury yield has fallen over the past few days, it remains at its highest level since September thanks to a brightening outlook for the economy.

“The modest uptick in mortgage rates over the last two months reflects declining recession fears and a more sanguine outlook for the global economy,” Sam Khater, Freddie Mac’s chief economist, wrote in the report. “Due to the improved economic outlook, purchase mortgage applications rose 15% over the same week a year ago, the second highest weekly increase in the last two years.”

Despite the fact that mortgage rates have risen in four of the last five weeks — which makes buying a home a relatively more expensive proposition — interest in buying a home does appear to be increasing.

The most recent mortgage application data from the Mortgage Bankers Association showed a 9.8% increase week-over-week in mortgage application volume. While that uptick was mostly led by refinances, it did reflect a 5% increase in applications for home purchase loans.

But as mortgage rates remain under 4%, a new risk for home buyers could emerge. So many homeowners today have a mortgage with an interest rate that begins with a “3.”

As a result, these people may not feel as inclined to sell and buy a newer, larger home in the years to come if mortgage rates increase markedly, according to Odeta Kushi, deputy chief economist for title insurance firm First American Financial Corporation /zigman2/quotes/210452372/composite FAF +1.74% .

For buyers, that so-called “lock-in effect” could significantly decrease the number of homes for sale in the months and even years to come, making it harder and more expensive to find a home to purchase.

/zigman2/quotes/202741363/composite
US : U.S.: OTC
$ 2.25
+0.02 +0.90%
Volume: 59,331
July 10, 2020 9:33a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.45 billion
Rev. per Employee
$10.66M
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
0.60
-0.0090 -1.48%
Volume: 0.00
July 10, 2020 9:48a
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/zigman2/quotes/210452372/composite
US : U.S.: NYSE
$ 47.15
+0.81 +1.74%
Volume: 29,105
July 10, 2020 9:48a
P/E Ratio
8.02
Dividend Yield
3.78%
Market Cap
$5.16 billion
Rev. per Employee
$314,786
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Jacob Passy is a personal-finance reporter for MarketWatch and is based in New York.

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