While this is not the surge in recent weeks, the ongoing uptrend in interest rates is bringing borrower demand closer to pre-COVID levels.
According to Freddie Mac's primary mortgage market survey, the average 30-year FRM rate rose to 3.18%, a 1 basis point increase from the previous week and its highest level since June 2020. However, the average is still below the year-ago rate of 3.33 %.
The general improvement in the economy and higher government bond yields in the first quarter drove growth in mortgage rates. Government bond yields rose again on Wednesday after President Biden released details of his proposed infrastructure plan, noted Zillow economist Matthew Speakman, who made comments on Wednesday evening.
"As the economy continues to thaw following the pandemic freeze and the surge in government spending, upward pressure on mortgage rates should remain," Speakman said. "An important test of the economy’s recovery efforts will be the digit numbers released in March and due to be released on Friday."
The 15-year average FRM was 2.45% from last week, down from 2.82% last year. The five-year Treasury-indexed hybrid floating rate mortgage also stayed flat week after week averaging 2.84%, but fell from 3.4% year over year.
Application volume continues to grow as interest rate growth lowers refinancing incentives and affects affordability for buyers with historically low inventory levels.
"Home buyer demand has risen from 25% above pre-COVID levels at the beginning of the year, when mortgage rates hit record lows, to 8% above pre-COVID levels today," Freddie Mac's chief economist Sam Khater said in a Press release. "We can even see that purchase demand has declined today compared to late May and early June 2020 when mortgage rates were at the same level."