Mortgage rates continue to climb

Driven by a strengthening economic picture, mortgage rates rose sharply last week, according to a weekly survey by the Mortgage Bankers Association.

The group says that for the week ending December 10, the average interest rate given out for a 30-year fixed-rate mortgage was 4.84 percent. That's up significantly from 4.66 percent the previous week, and is the highest interest rate seen since the beginning of May.

The rising rates drove the volume of applications lower, as some borrowers backed away from the market. Mortgage applications dropped 2.3 percent during the week, including a 2 percent reduction in purchase applications, which had been riding recent gains.

"Not surprisingly, with rates up more than half a percentage point over the past month, refinance activity has declined sharply. Home purchase applications dropped this week following three weeks of increases, but remain near levels last seen in early May," said Michael Fratantoni, MBA's vice president of research and economics.

Mortgage rates have been one of the driving factors in housing affordability in recent months. The National Association of Home Builders says that during the third quarter of the year, low home prices and mortgage rates meant that 72.5 percent of Houston homes sold during the period were affordable for those with the median income.