Mortgage Applications Rise as Interest Rates Hit Highest Level Since Summer

Interest rates may be up, but home buyers are still biting.

Mortgage rates have been climbing steadily over the past month and have reached their highest level since the summer. But that's not stopping home buyers from making offers on properties.

In fact, mortgage applications to purchase homes climbed 3% last week from the previous week, according to the Mortgage Bankers Association. All told, sales volume was 26% higher than it was a year ago.

Rates are still competitive

One of the reasons why buyers are still clamoring for homes is that mortgage rates are still competitive. Home prices, on the other hand, aren't. Record low inventory has driven property values up, and many buyers are finding that they're priced out of the current market.

Buy today or wait?

If you're interested in buying a home, you may be wondering if now's a good time, given the state of the housing market and the way interest rates are trending. There's really no right or wrong answer. But let's walk through the pros and cons of buying today versus waiting until later in the year.

First, the pros:

• Interest rates for home loans are still attractive.
• Interest rates have been steadily increasing. So buying now means potentially getting a better deal from a mortgage lender than you would if you wait until later on in the year.

Now, let's talk cons:

• Home prices are inflated, which impacts how much house you can afford.
• Limited inventory means having to settle for a home you're not in love with or duking it out with other buyers trying to make an offer on a house.
• Mortgage rates, though competitive, may not be at a low enough level to offset higher home prices.

Clearly, it's a tough decision to make, so a lot of it should boil down to your personal experience in the housing market. Are you finding yourself growing increasingly frustrated with your home search by the day? Are you worried you'll wind up overpaying for a home? If so, it could pay to put your house hunting on hold.

On the other hand, depending on the average house price in your state, your home buying budget, and the selection of homes in your area, you may decide to continue with your home search and try to buy sooner rather than later.

The fact that buyers are still applying for mortgages means they're not letting climbing interest rates scare them away. If you're interested in buying today, be prepared to face steep competition. If you're up for the challenge, then it pays to keep at that home search. Otherwise, you may want to sit tight for a number of months and see if inventory opens up.

Spring has traditionally been a popular time to list a home, but right now, there's still a lot of economic and COVID-related uncertainty. That's why it's hard to know if there will be a lean spring housing market or the typical spring boom. But chances are, inventory will pick up at some point this year. So holding off could make the home buying process a lot less stressful and a lot more successful.