A sale sign stands outside a house in Miami Beach.

Carlos Barria | Reuters

After hitting more than a dozen record lows in the past year, mortgage rates started spiking in 2021, which sparked a fire among borrowers for fear they might miss out on the last of the lowest rates.

Mortgage applications to refinance a home loan increased 20% in the past week compared to the previous week, according to the seasonally adjusted index of the Mortgage Bankers Association. That was the highest level since last March. The volume was 93% higher than a year ago.

The average contract rate on 30-year fixed rate mortgages with compliant loan balances ($ 510,400 or less) increased from 2.86% last week for down payment loans of 20% to 2.88%. This rate was 99 basis points higher than a year ago.

“The booming refinancing activity in the first full week of 2021 meant that mortgage applications rose to their highest level since March 2020, even though most mortgage rates in the survey rose last week,” said Joel Kan, vice president for business and finance Industry forecasts at MBA. “The expectation of additional fiscal stimulus from the new administration and the introduction of vaccines that improve the outlook resulted in higher yields and interest rates on government bonds.”

Home purchase mortgage applications, which are less sensitive to weekly rate changes, rose 8% over the week and were 10% higher than a year ago. While housing demand remains strong, the year-on-year comparison was lower than the previous six months as buyers faced record low supply of homes for sale and rapidly rising prices. However, the numbers for first-time buyers showed a promising sign.

“The lower average loan balance was partly due to a 9.2% increase in FHA applications. This is a positive sign that lower-income and first-time homebuyers are returning to the market,” Kan said.

Mortgage rates continued their uptrend this week after bond yields rose. Much of this can be attributed to the Democratic victory in Georgia, who shifted control of the U.S. Senate. It is now also expected that more government facilitation and vaccines will be introduced faster, which would improve employment and the overall economy.

“For now, the invincibility of mortgage rates and the persistent setting of new record lows has been replaced by a healthy respect for what may be the first phase of a rising interest rate environment that we have seen for the first time since 2018.” “said Matthew Graham, chief operating officer for Mortgage News Daily.