More in U.S. applying for home loans in face of rising interest rates

May 11 (UPI) -- Rising inflation and higher interest rates aren't deterring many Americans from seeking home loans, as demand in the mortgage market is up, an industry report said on Wednesday.

The Mortgage Bankers Association said that overall applications last week rose by 5%. The level is still about 8% off what it was a year ago, but analysts say that gap is shrinking.

The report said that potential buyers may be applying now before interest rates get even higher. Last week, the Federal Reserve hiked rates by a half-point -- its largest single increase in 22 years -- to get a handle on rising inflation.

"The increase in mortgage applications last week was driven by a strong gain in application activity for conventional and government purchase loans, even as mortgage rates rose to their highest level since 2009," Joel Kan, MBA associate vice president of economic and industry forecasting, said in a statement Wednesday.

The assessment noted that buyers are particularly going for adjustable-rate mortgages -- loans that offer lower interest rates up front, but can be dangerous on the back end because they're not locked in and remain open to market influences.

The MBA said that rates for ARMs rose from 4.68% to 4.78% last week -- and the average contract rate for a 30-year fixed mortgage climbed from 5.36% to 5.53%.

"Prospective buyers are showing some resiliency to higher rates," Kan added. "Purchase activity has now increased for two straight weeks. More borrowers continue to utilize ARMs to combat higher rates."

Wednesday's update said that ARMs accounted for 11% of all mortgage applications last week. Unsurprisingly, applications to refinance are down 70% over May 2021 due to the higher rates.

Earlier Wednesday, the Labor Department said that a key inflation gauge showed that prices increased by 0.3% during the month of April, slightly more than most economists predicted.