New-Home Sales Drive Mortgage Demand Despite Rising Rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 6.75% from 6.73% last week, but that increase didn’t dissuade new borrowers. Instead, applications for a mortgage to purchase a home rose 3%, the third straight week of small but steady gains, according to CNBC.

Purchase applications are still down 21% year-over-year, but as demand for new-home construction rises amid a shortage of existing homes for sale, mortgage demand is following closely behind.

“New home sales have been driving purchase activity in recent months as buyers look for options beyond the existing-home market,” said Joel Kan, MBA’s vice president and deputy chief economist, in a release. “Existing-home sales continued to be held back by a lack of for-sale inventory as many potential sellers are holding on to their lower-rate mortgages.”

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