Borrowers looking to refinance before interest rates go up drove mortgage volume higher last week. Mortgage applications increased 7.3 percent from the prior week, according to the Mortgage Bankers Association. Refinance applications jumped 11 percent, and purchase applications rose 4 percent.
Even though the Federal Reserve increased short-term rates by 25 basis points on Dec. 16, the hike barely budged long-term rates. The average contract interest rate on the 30-year fixed mortgages rose to 4.16 percent from 4.15 percent. Rates on a 15-year fixed-rate mortgage nudged up 0.07 percent to 3.45 percent, the highest level since October 2014.
"Borrowers may have been spurred to act by the potential for future rate increases from the Fed, which are more likely to be reflected in higher mortgage rates over time," said Mike Fratantoni, the association's chief economist.