Mortgage rates have been rising since the start of the year, but buyers at first seemed unfazed, some even rushing to get in before rates moved higher. Now buyers are pulling back.

Mortgage applications to purchase a home dropped 10% last week compared with the previous week, seasonally adjusted, and were 12% lower year over year, according to the Mortgage Bankers Association. The average loan size hit another record high at $446,000, indicating that most of the buying activity is on the higher end of the market, where there is comparatively more supply.

And supply is a key factor in mortgage demand. The total inventory of homes for sale was down 28% nationally in January from January of last year, according to Realtor.com. New listings were also down 9%, the second straight month of declines. That is likely playing into February as well, since sellers are not exactly rushing into the market.

“We’re forecasting a whirlwind year ahead for buyers, and, if January housing trends are any indication, 2022 competition is already heating up. Homes sold at a record-fast January pace, suggesting that buyers are more active than usual for this time of year,” said Danielle Hale, Realtor.com’s chief economist.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 3.83% from 3.78%, with points decreasing to 0.40 from 0.41 (including the origination fee) for loans with a 20% down payment. The rate was 87 basis points lower one year ago.

“Mortgage rates followed the U.S. 10-year yield and other sovereign bonds as the Federal Reserve and other key global central banks responded to growing inflationary pressures and signaled that they will start to remove accommodative policies,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

As a result, applications to refinance a home loan fell 7% for the week and were 52% lower than the same week one year ago. The refinance share of mortgage activity decreased to 56.2% of total applications from 57.3% the previous week. There is a shrinking population of borrowers who can benefit from a refinance now, about half as many as there were one year ago.