Mortgage rates are rising again, but homebuyers are seeing some advantages

Mortgage rates continued their climb last week, but homebuyers trickled back into the market, perhaps taking advantage of less competition and some price cuts. That helped push total mortgage demand last week 1.9% higher compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, increased to 6.69% from 6.65%, with points decreasing to 0.62 from 0.67, including the origination fee, for loans with a 20% down payment. That was the highest rate since last August.

As a result, refinance demand, which is highly sensitive to weekly rate moves, fell 2% for the week and was just 7% higher than the same week one year ago. Last year at this time, the average on the 30-year fixed loan was just 15 basis points higher.

Applications for a mortgage to purchase a home rose 6% for the week and were 0.2% higher year-over-year — basically flat. Potential buyers are starting to get a little break, as the market settles into its historically slower summer months. Real estate agents in CNBC’s Housing Market Survey report sellers seem to be more willing to cut prices.

“Growing home inventory in many markets is supporting more purchase activity,” said Mike Fratantoni, MBA’s SVP and chief economist. “Incoming data showed that inflation dropped in June, but with oil prices spiking again, that improvement seems unlikely to continue in July data, and mortgage rates are likely to remain higher as a result.”

Mortgage rates moved even higher to start this week, matching their last high from mid-May, according to a separate survey from Mortgage News Daily. New escalations in the war with Iran overshadowed last week’s cooler-than-expected inflation reports.

“For those who want to keep the analysis simple, fuel prices do a good enough job explaining the move. In fact, August gasoline futures also just hit their May 19th highs this week–perfectly aligning with the round trip in rates,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.