Multiple Fed members have come out supporting policy rate increases to curb inflation, beginning as early as March.

Although the Fed doesn't set mortgage rates, expectations of upcoming Fed policy rate hikes pushed mortgage rates higher this week.

Both consumer and wholesale inflation continue to be a problem. Consumer inflation rose 7% in December, its biggest gain since 1982.

Purchase mortgage applications rose 2% last week compared with the previous week, as higher mortgage rates have homebuyers nervous.

Refinance apps were 50% lower year-over-year and the lowest level in 3 months, but they were down only 0.1% from the prior week.

Despite rising rates, the housing market is expected to remain competitive this year. Sales are expected to grow 6.6% to a 16-year high.