Mortgage applications rose 1.4% on a seasonally adjusted basis during the first week of the year, while the average 30-year fixed-rate mortgage jumped 19 basis points week over week to 3.52% — its highest level since March 2020, the Mortgage Bankers Association said, citing its Market Composite Index.

The average contract interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration increased to 3.50% from 3.40%, and the average contract interest rate for a 15-year fixed-rate mortgage rose to 2.73% from 2.6%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances of more than $647,200 increased to 3.42% from 3.31%.

On an unadjusted basis, the market composite index, which measures mortgage-loan application volume, jumped 46%. The refinance index, meanwhile, slid 0.1% from the previous week and was down 50% from the same week a year ago. The refinance share of mortgage activity decreased to 64.1% of total applications from 65.4% the previous week.

The seasonally adjusted purchase index gained 2% from the previous week, while the unadjusted purchase index climbed 51% and was 17% lower than one year ago.  

“Mortgage rates increased significantly across all loan types last week as the Federal Reserve’s signaling of tighter policy ahead pushed U.S. Treasury yields higher,” MBA associate vice president of economic and industry forecasting Joel Kan said in a press release. “Rates at these levels are quickly closing the door on refinance opportunities for many borrowers. 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.”

The adjustable-rate mortgage share of activity slid to 3.1% of total applications. The FHA share of total applications increased to 9.9% from 9.2% in the preceding week, while the VA share of applications rose to 11.4% from 11.3%. The USDA share of applications was flat at 0.4%.

“MBA expects solid growth in purchase activity this year, as demographic drivers and the strong economy support housing demand,” Kan added. “However, the strength in growth will be dependent on housing inventory growing more rapidly to meet demand.”