Interest rates are rising, but home purchases are going in the opposite direction.

The average interest rate for a 30-year fixed-rate home loan (for loans up to $806,500) rose slightly from 6.37% to 6.40%, its highest level since early October. However, compared to the same period a year ago, the current rate is still 0.46% lower.

Surprisingly, despite rising interest rates, home loan applications rose 8% in the week, up 20% year-over-year. This trend was primarily driven by buyers seeking low-interest government loans, such as FHA, VA, and USDA loans.

Refinancing volumes are down, even though year-on-year figures appear high.

In contrast, mortgage refinancing applications fell 6% for the week, despite appearing to be a 117% jump compared to the previous year. This surge isn't due to a refinancing boom, but rather to a historically low base year-over-year.

Interest rate trends during the long holiday

However, there were some positive signs when interest rates started to decline earlier this week, according to Mortgage News Daily (MND), but experts still see it as a short-term factor.