Mortgage Rates Climb to Highest Level Since January, but Homebuyer Demand Grows

Despite rising mortgage rates, homebuyer demand continues to show surprising resilience. According to a recent report from CNBC, mortgage rates have now climbed to their highest level since January 2025, but many buyers are still actively entering the market.

Mortgage Rates Reach 6.98%

The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances (up to $806,500) increased to 6.98% last week, up from 6.92% the week before. This marks the third consecutive weekly increase, pushing rates to levels not seen since early this year. However, the slight uptick in rates has not stopped homebuyers.

According to the Mortgage Bankers Association (MBA), mortgage applications to purchase a home rose 2% compared to the previous week. Even more notable, purchase applications are now 18% higher than the same time one year ago, signaling continued strength in homebuying activity despite higher borrowing costs.

What’s Driving the Demand?

Joel Kan, an economist at the MBA, noted that increased housing inventory in many markets is helping to sustain transaction volume.

“Purchase applications were up over the week and continue to run ahead of last year’s pace as increased housing inventory in many markets has been supporting some transaction volume, despite the economic uncertainty,” Kan explained in the CNBC report.

Essentially, even though rates are rising, more homes are hitting the market, giving buyers more options — and many are choosing to act before rates climb even higher.

Refinance Activity Takes a Hit

While home purchase demand is growing, the refinance market is feeling the pinch. Applications to refinance a home loan dropped 7% last week. Conventional refinance applications declined by 6%, and VA refinance applications fell by 16%.

Still, refinance demand remains 37% higher than it was a year ago, showing that some homeowners are still finding opportunities to refinance, even in a higher-rate environment.

Consumer Confidence and Mortgage Rates

There is some good news on the horizon.

Mortgage rates have edged slightly lower to start this holiday-shortened week, following the release of a stronger-than-expected Consumer Confidence Index. However, concerns about the labor market lingered within the report.

According to Matthew Graham, chief operating officer at Mortgage News Daily,

“The Consumer Confidence Index was stronger than expected, but one of its components raised concern over the labor market. Weaker labor conditions tend to push rates lower, all else equal.”

This led to improvements in the bond market and prompted several mortgage lenders to issue revised, lower rates in response.

What This Means for Homebuyers

For homebuyers in 2025, the takeaway is clear:

Mortgage rates are volatile but not necessarily a reason to sit on the sidelines. With more inventory coming to market and rates still historically moderate compared to past decades, many buyers are finding it worthwhile to move forward, even in a higher-rate environment.

This blog is based on reporting from CNBC.

Thinking About Selling Your Home?

With buyer demand staying strong even as rates rise, it could be a great time to list your home.

If you are considering selling and want to keep more of your hard-earned equity, a flat fee MLS listing can help you reach more buyers without paying high commission fees.