The Mortgage Bankers Association reported that loan applications increased by 1.6 percent last week. It was likely that lending is rising due to, and not in spite of an increase in interest rates. Most 30 year fixed rates, for instance, are at 7 year highs. While this is encouraging in the short term, there is also plenty of room to be cautious.
Applications for new homes did not increase at the same pace, and there is evidence that people are being priced out of homes. For instance, loans on the higher end in California have slowed and property valuations have slowed especially on the high end of the market.
Banks should take advantage of the present environment, but prepare for a slow down if interest rates continue to rise over the next two years.