Mortgage rates hit highest level since August as buyers find more listings

Mortgage rates are climbing again, raising the monthly cost of buying a home. Yet buyers are not fully stepping back, because more homes for sale and more flexible sellers are giving some shoppers a better shot than they had earlier in the year.

Total mortgage application volume rose 1.9% last week from the prior week, according to the Mortgage Bankers Association’s seasonally adjusted index reported by CNBC. The gain came even as the average contract rate on a 30-year fixed mortgage moved to its highest level since last August.

The MBA said the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less increased to 6.69% from 6.65%. Points, which are upfront fees paid to lower or set a mortgage rate, fell to 0.62 from 0.67, including the origination fee, for borrowers making a 20% down payment.

Purchase demand rose despite higher rates

Applications for loans to buy homes increased 6% for the week, according to the MBA. Compared with the same week a year earlier, purchase applications were up 0.2%, which CNBC described as roughly flat.

That split matters for regular buyers watching affordability. A higher mortgage rate typically means a higher monthly payment for the same home price and loan size. But a cooler summer market can reduce pressure from bidding wars, and CNBC reported that real estate agents in its Housing Market Survey said sellers appear more open to lowering asking prices.

Mike Fratantoni, the MBA’s senior vice president and chief economist, said expanding supply is helping. “Growing home inventory in many markets is supporting more purchase activity,” Fratantoni said, according to CNBC.

For buyers, inventory means the number of homes available for sale. More inventory can give shoppers more choices and may weaken sellers’ pricing power, although the effect varies by local market.

Refinancing took a hit

Refinance applications fell 2% for the week, the MBA said. Refinance demand is especially sensitive to rate changes because homeowners usually refinance to replace an existing mortgage with a new one, often to reduce the rate or monthly payment.

Refinance applications were still 7% higher than the same week one year ago, according to the MBA. CNBC noted that the average 30-year fixed rate was only 15 basis points higher at this point last year. A basis point is one-hundredth of a percentage point.

The rate pressure continued after the MBA’s weekly period. Mortgage News Daily, in a separate survey cited by CNBC, said rates rose again to start the week and matched their previous high from mid-May.

Fratantoni linked the outlook for rates to inflation and energy costs. He said incoming data showed inflation cooled in June, but added that oil prices had risen again, making it less likely that the improvement would carry into July data. He said mortgage rates were likely to stay elevated as a result, according to CNBC.

Mortgage News Daily’s chief operating officer Matthew Graham also pointed to fuel prices. “For those who want to keep the analysis simple, fuel prices do a good enough job explaining the move,” Graham wrote, according to CNBC. He added that August gasoline futures had also reached their May 19 highs, lining up with the rebound in rates.

CNBC reported that newer escalations in the war with Iran outweighed the prior week’s cooler-than-expected inflation reports in the rate market. For households, the takeaway is that mortgage rates are being pulled by forces beyond housing itself, including inflation expectations, oil prices and geopolitical risk.

This story draws on original reporting from CNBC.