Weekly mortgage demand inched up, despite higher interest rates. Here’s why.

After flatlining the week before, mortgage demand rose last week, despite mortgage rates rising for the fourth straight week. Total application volume increased 1.7% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.90% from 6.86%, with points increasing to 0.70 from 0.60 (including the origination fee) for loans with a 20% down payment. That was the highest level since July.

Applications for a mortgage to purchase a home rose 2% for the week but were 1% lower than the same week one year ago. Purchase demand was driven by conventional and FHA loans, with FHA purchase applications seeing a 7% increase.

“For-sale inventory has loosened in some markets and some potential buyers have been able to take advantage of increasing supply and lower FHA rates which were down slightly in comparison to the conforming 30-year fixed rate,” said Joel Kan, an MBA economist in a release.

Applications to refinance a home loan rose 2% for the week and were 43% higher than the same week one year ago. Demand was driven by a 10% increase in VA applications.

Mortgage rates are about flat so far this week, according to a separate survey from Mortgage News Daily. They moved higher Monday but then fell Tuesday on news that he U.S. authorized Ukraine to use long range missiles to attack Russia, which has already threatened to respond with nuclear weapons. Bond yields dipped in a so-called flight to safety by investors.

“The improvement in mortgage rates was wholly underwhelming relative to the news headlines — likely because it’s far from the first such threat from Russia, or because traders are skeptical that anyone wants to push any of the red buttons on the “mutually assured destruction” machine,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.