Purchases picked up at the start of 2022, driving mortgage volumes to a first-week gain despite steadily climbing interest rates, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, a measure of mortgage-application activity based on a survey of association members, inched up 1.4% compared to the prior week on a seasonally adjusted basis for the period ending Jan. 7. The previous week included adjustments for end-of-year holidays. Seasonally adjusted volume was 40% lower than the first week of last year.

The Refinance Index edged down by 0.1% from seven days earlier, with rising rates reducing incentive, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting. Compared to week one of 2021, refinance volume came in 50% lower.

“Although refinance activity changed little over the week, applications remained at their lowest level in over a month, and conventional refinance applications were at their lowest level since January 2020,” Kan said in a press release.

Continued high purchase demand, though, helped offset the refinance slowdown, with the seasonally adjusted Purchase Index climbing 2% compared to the previous weekly period. A recent Redfin survey found that the current rate environment might be pushing home buyers toward purchases in the near term.

“The housing market started 2022 on a strong note,” Kan said. “Both conventional and government purchase applications showed increases, with FHA purchase applications increasing almost 9%, and VA applications increasing more than 5%.”

Refinances accounted for a smaller share of overall new-loan activity compared to the prior week, down to 64.1% from 65.4%. Adjustable-rate mortgages made up 3.1% of weekly volume, compared to 3.3% seven days earlier.

Average loan amounts for the week increased across all categories, with the overall mean size climbing 1.9% on a weekly basis to $338,000 from $331,600. The purchase mortgage average nudged up by only a fraction to $401,700 from $401,600, while the average refinance amount was $302,300, jumping 2.6% from $294,600 in the previous weekly period to move back above the $300,000 threshold.

Federally-backed loans represented a larger share of activity week over week relative to overall numbers. Federal Housing Administration-sponsored mortgages increased to 9.9% of volume, up from 9.2%. Veterans Affairs-sponsored loans also rose to 11.4% from 11.3% the previous week, and applications coming via the U.S. Department of Agriculture accounted for the same 0.4% share.

Interest rates continued its upward trend from the close of last year, with the conforming 30-year fixed rate reaching its highest point since May 2020, Kan said. Rates increased across all categories, and January ushered in a new conforming balance of $647,200 as well.

The average contract interest rate for 30-year conforming fixed-rate mortgages jumped 19 basis points to 3.52% compared to 3.33% a week earlier.

The fixed rate for 30-year jumbo loans with balances exceeding the new conforming amount averaged 3.42%, rising from 3.31% in the previous reporting period.

The FHA-backed 30-year fixed-rate average also saw a double-digit increase, coming in at 3.5%, 10 bps above 3.4% the prior week.

The average contract interest rate for 15-year fixed-rate mortgages was 2.73%, 13 basis points above its level of 2.6% in the final week of 2021. The 5/1 adjustable-rate mortgage average stood at 3.03%, up from 2.45% seven days earlier.

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