Mortgage interest rates softened last week after shooting above 7%, falling back to 6.95%, Freddie Mac reported Thursday.
Freddie’s Primary Mortgage Market Survey found that the 30-year fixed-rate mortgage averaged 6.95%, down from 7.08% the week prior.
A year ago at this time, the 30-year FRM averaged 3.09%.
“Mortgage rates continue to hover around 7%, as the dynamics of a once-hot housing market have faded considerably,” said Sam Khater, Freddie Mac’s Chief Economist.
“Unsure buyers navigating an unpredictable landscape keep demand declining while other potential buyers remain sidelined from an affordability standpoint. Yesterday’s interest rate hike by the Federal Reserve will certainly inject additional lead into the heels of the housing market.”
The Federal Reserve approved another 75 BPS interest rate hike this week.
Fed Chairman Jerome Powell also said that interest rates will go even higher than previously forecast but in smaller increments.
“It is very premature to be thinking about pausing,” he said.
He said slowing the pace of increases won’t come for at least one or two more FOMC meetings. In a statement, the FOMC said there will be “ongoing increases” until rates are “sufficiently restrictive to return inflation to 2% over time.”
Zillow Home Loans Senior Economist Matthew Speakman noted that the relative calm of this week’s mortgage rates likely won’t last long now that the FOMC has assured further increases.
“Rates came back down in recent weeks, indicating that investors landed at a point in which they believed expectations for key economic data and the Fed’s plans were sufficiently ‘priced-in.’ But this serene stretch will almost certainly end in the days ahead,” he said.
“All told, the calm waters on which mortgage rates have recently sailed appear likely to get choppier.”
John Alestra, a realtor who works at Agile Group Realty in Tampa, told The Mortgage Note’s Editor Kimberley Haas that the buyers he is working with are a mixed bag when it comes to their reactions to mortgage rates rising.
“Some buyers are getting spooked at the sight of the newer rates. Others are needing to reassess their budget. Others don’t seem concerned at all, either due to the fact that they have some historical context/experience with rates that were even higher than they are right now, or due to the fact that they understand that higher rates are, for the most part, temporary when compared to their need or desire to achieve homeownership,” Alestra said on Thursday.
During a recent interview with Haas, Alestra said potential buyers should remember that they can refinance their loans in the future when rates drop.
Additional findings from Thursday’s report:
- 15-year fixed-rate mortgage averaged 6.29% with an average 1.2 point.
- A year ago at this time, the 15-year FRM averaged 2.35%.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 5.71%, dropping from last week’s 5.95%, with an average 0.2 point.
- A year ago at this time, the 5-year ARM averaged 2.54%.
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