“The yield on the 10-year Treasury note has been trending up due to the decline in new COVID cases, increasing consumer optimism, as well as broadening inflation and persistent shortages,” said Freddie Mac chief economist Sam Khater. “Mortgage rates are also rising, but purchase demand remains firm, showing that latent purchase demand exists among consumers.”
Holden Lewis, home and mortgage specialist at NerdWallet, added: “Inflation, accompanying a stubbornly recovering economy, is pressing upward on mortgage rates. The remedy — stricter monetary policy — will cause mortgage rates to rise, too.”
Read more: Number of borrowers looking to refinance continues to decrease
Higher rates continue to reduce borrowers’ incentive to refinance, according to the Mortgage Bankers Association. While the total mortgage application volume edged up three basis points last week, refinance applications were down 2% week over week and 26% year over year.