The average long-term U.S. mortgage rate rose to its highest level in five weeks, a setback for prospective homebuyers during what’s traditionally the busiest time of the year for home sales. The average rate on a 30-year mortgage rose to 6.88% from 6.82% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.27%.
Quick Read
- The average long-term U.S. mortgage rate has reached a five-week high, impacting potential homebuyers during the peak home sales season, with the 30-year mortgage rate rising to 6.88% from 6.82% last week.
- Rising mortgage rates increase monthly borrowing costs, affecting affordability amid a housing market constrained by limited inventory and escalating home prices.
- Recent economic data suggesting sustained employment growth and higher-than-expected inflation have fueled speculation about the Federal Reserve’s timeline for reducing its benchmark interest rate.
- Treasury yields surged following a report indicating higher-than-anticipated inflation in March, with the 10-year Treasury yield reaching its highest since November at 4.57%.
- Despite peaking at 7.79% in October, the average 30-year mortgage rate has stayed below 7% since early December but hasn’t dropped below the 6.6% mid-January average.
- Mortgage rates are expected to fluctuate between 6.6% and 7% until significant progress is made towards the Fed’s inflation target, with the spring selling season offering limited relief to buyers and sellers due to robust economic indicators.
- The housing market has experienced a prolonged sales downturn due to rising mortgage rates and a shortage of available homes, though there’s been a recent uptick in sales attributed to slightly lower rates.
- The discrepancy between current mortgage rates and those available two years ago has contributed to a low supply of previously occupied homes on the market, as many homeowners are unwilling to relinquish their low fixed-rate mortgages.
- While some easing of mortgage rates is anticipated later in the year, forecasts generally predict that the average rate on a 30-year mortgage will remain above 6%.
- Refinancing costs have also increased, with the average rate on 15-year fixed-rate mortgages rising to 6.16% from 6.06% last week.
The Associated Press has the story:
Average long-term US mortgage rate rose to 6.88%, the highest level since early March
Newslooks- LOS ANGELES (AP) —
The average long-term U.S. mortgage rate rose to its highest level in five weeks, a setback for prospective homebuyers during what’s traditionally the busiest time of the year for home sales.
The average rate on a 30-year mortgage rose to 6.88% from 6.82% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.27%.
When mortgage rates rise, they can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford at a time when the U.S. housing market remains constrained by relatively few homes for sale and rising home prices.
Rates have been mostly drifting higher in recent weeks as stronger-than-expected reports on employment and inflation have stoked doubt among bond investors over how soon the Federal Reserve will move to lower its benchmark interest rate. The central bank has signaled that it expects to cut its short-term rate three times this year once it sees more evidence of cooling inflation.
On Wednesday, Treasury yields jumped in the bond market following a report showing that inflation was hotter last month than economists expected. The March consumer prices report was the third straight showing inflation readings well above the Fed’s 2% target. A report on Thursday showed inflation at the wholesale level was a touch lower last month than economists expected.
The yield on the 10-year Treasury, which lenders use as a guide to pricing loans, jumped to 4.57% on Thursday afternoon, it’s highest level since November. How the bond market reacts to the Fed’s interest rate policy, the moves in the 10-year Treasury yield, as well as other factors can influence mortgage rates.
After climbing to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage has remained below 7% since early December, though it also hasn’t gone below the 6.6% it averaged in mid January.
Mortgage rates will likely continue to hover between that 6.6% and 7% range until inflation shows convincing progress towards the Fed’s target, said Hannah Jones, Realtor.com’s senior economic research analyst.
“Eager buyers and sellers are hoping to see more favorable housing conditions as the spring selling season kicks off,” said Jones. “However, mortgage rates have offered little relief as economic data, as measured by both inflation and employment, remains strong.”
The U.S. housing market is coming off a deep, 2-year sales slump triggered by a sharp rise in mortgage rates and a dearth of homes on the market. The overall pullback in mortgage rates since their peak last fall helped spur a pickup in sales the first two months of this year.
Sales of previously occupied U.S. homes rose in February from the previous month to the strongest pace in a year. That followed a month-to-month home sales increase in January.
Still, the average rate on a 30-year mortgage remains well above where it was just two years ago at 5%. That large gap between rates now and then has helped limit the number of previously occupied homes on the market because many homeowners who bought or refinanced more than two years ago are reluctant to sell and give up their fixed-rate mortgages below 3% or 4%.
Many economists still expect that mortgage rates will ease moderately later this year, though most forecasts call for the average rate on a 30-year home loan to remain above 6%.
The cost of refinancing a home loan also got pricier this week. Borrowing costs on 15-year fixed-rate mortgages, often used to refinance longer-term mortgages, rose this week, pushing the average rate to 6.16% from 6.06% last week. A year ago it averaged 5.54%, Freddie Mac said.
