A worker walks on the roof of a new home under construction in Carlsbad, California.

Mike Blake | Reuters

Higher mortgage rates don’t seem to be dampening home buying demand, but they do reduce refinancing volumes.

Mortgage applications for home purchases rose 3% in the past week from the previous week, according to the seasonally adjusted index of the Mortgage Bankers Association. This is the fourth straight week of gains. The volume was 26% higher than a year ago. However, annual comparisons are likely to get huge over the next month as home buying stalled at the start of the pandemic a year ago.

“Purchase requests were strong over the week from both households looking for more housing and younger households looking to buy a home,” said Joel Kan, MBA economist. “The average purchase credit balance rose again, both from an acceleration in property price growth and an increase in conventional higher-balance applications.”

Kan warned that as prices rise and mortgage rates continue to rise, “affordability problems may increase if new and existing supply doesn’t pick up significantly”.

The average contract rate for 30-year fixed rate mortgages with compliant loan balances ($ 548,250 or less) increased from 3.28% to 3.36% for loans with a 20% down payment.

“Mortgage rates have risen in line with government bond yields as the outlook for the US economy continues to improve amid the faster adoption of vaccines and easing of pandemic-related restrictions,” Kan said.

The interest rate has risen by more than 50 basis points, or half a percentage point, since the start of the year, reducing the potential savings from a refinancing.

Mortgage applications to refinance a home loan decreased by 5% over the course of the week and were 13% below the previous year’s figure. This was the slowest pace since September, with declines in conventional and government applications. The refinancing share of mortgage activity decreased from 62.9% in the previous week to 60.9% of the total applications.