Mortgage demand from homebuyers hits highest level since September, despite rising interest rates

As the housing market heads into its traditionally slowest season, homebuyers are making one last gasp, likely due to more supply on the market and softening prices.

Mortgage applications to purchase a home rose 6% last week to their strongest pace since September, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 31% higher than the same week one year ago.

This came despite the fact that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.34% from 6.31%, with points increasing to 0.62 from 0.58, including the origination fee, for loans with a 20% down payment. That rate is 52 basis points lower than it was one year ago.

"Purchase applications for conventional, FHA, and VA loans increased, as potential homebuyers continue to shop around, particularly in markets where inventory has increased and sales price growth has slowed. Based on the unadjusted purchase index for the week, this was the strongest start to November since 2022," said Joel Kan, an MBA economist in a release.

Demand for refinancing, which had been very strong last month, dropped 3% for the week but was still 147% higher than the same week one year ago, thanks to lower rates.

"Higher mortgage rates did quell some refinance activity, as conventional and VA refinance applications declined over the week, and the average loan size for refinances dropped to its lowest level in over a month," Kan added.

Mortgage rates haven't moved much this week so far, especially given the bond market's Veteran's Day closure. Markets are watching the potential end of the government shutdown this week, which could bring a stronger reaction for interest rates.