The sign on a property for sale in Somerville, Massachusetts reads "Buy This Home I'll Buy Yours For Cash" October 25, 2010.
The sign on a property for sale in Somerville, Massachusetts reads "Buy This Home I'll Buy Yours For Cash" October 25, 2010.

The holiday season isn’t slowing down home buying. Just the opposite, say analysts, despite higher inflation and mortgage rates.

For the third straight week, mortgage demand rose among home buyers, driven partly by a fear that mortgage rates will rise in the new year and make buying out of reach. The numbers are buoying what is historically the slowest time of the year for home sales.

The conventional wisdom has been that home buying peaks in the spring but slows in the gloomy wintertime after school has started and the curb appeal has diminished.

But the current trend is bucking the usual norm. Total mortgage application volume rose 1.8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Based on MBA’s data, applications to purchase a home rose 5% for the week but were still 4% lower than the same week one year ago.

Call it the fear factor.

“Despite a fair amount of rate volatility last week, mortgage rates were higher,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting in a release. “Borrowers continue to lock in mortgages in anticipation of higher rates in the future.”

Mortgage rates continued to trend upward this week and are now more than 10 basis points higher than they were last Friday, according to Mortgage News Daily. Rates are now at the highest level since last April.

Analysts say both conventional and government loan applications increased with the average loan size for a home purchase loan at $407,200. That figure mirrors the average loan for most of this year at just above $400,000.

Mortgage rates have been rising for the past month and continued to do so last week.

CNBC cited MBA’s recent analysis noting the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.24% from 3.20%, with points decreasing to 0.36 from 0.43 (including the origination fee) for loans with a 20% down payment.

Although refinancing is showing signs of cooling. Mortgage applications to refinance a home loan were essentially flat, rising just 0.4% from the previous week. They were 34% lower than the same week one year ago when rates were 32 basis points lower.

The refinance share of mortgage activity increased to 63.1% of total applications from 62.9% the previous week, according to the MBA.