Mortgage rates aren’t going down as the spring homebuying season rapidly approaches.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.90%, up from the week prior’s 6.77%. A year ago at this time, the 30-year FRM averaged 6.50%.
The 15-year fixed jumped to 6.29% from 6.12%. A year ago, it averaged 5.76%.
“Strong incoming economic and inflation data has caused the market to re-evaluate the path of monetary policy, leading to higher mortgage rates,” said Sam Khater, Freddie Mac’s Chief Economist.
“Historically, the combination of a vibrant economy and modestly higher rates did not meaningfully impact the housing market. The current cycle is different than historical norms, as housing affordability is so low that good economic news equates to bad news for homebuyers, who are sensitive to even minor shifts in affordability.”
January’s Consumer Price Index grew by 0.3% month-over-month and 3.1% YOY, more than analysts expected and a blow to the Fed’s inflation fight. Wall Street no longer expects March rate cuts from the Central Bank and instead assumes movement later in the year.
After the January meeting of the Federal Open Markets Committee, Fed Chairman Jerome Powell admitted that the Central Bank’s inflation fight has put undue pressure on homebuyers, especially first-timers.
But he asked Americans to be patient, saying they will reap the rewards of this hardship later.
“[W]hat that means is that interest-sensitive spending like mortgages and buying, you know, durable goods and things like that, that’s going to be expensive for a while,” he said in an interview on “60 Minutes.”
“But this is all part of getting back to a place of price stability when interest rates can be low again on a sustainable basis.”
Rates cooled in January, hovering in the mid-6s for several weeks and enticing some buyers back to the market. Recent increases have once again put the brakes on mortgage applications. But Fannie Mae’s Economic and Strategic Research Group continues to predict that rates will decline over the course of the year, assuming good conditions.
“Right now, our base case scenario foresees economic growth decelerating, rates gradually declining, and new single-family home sales slowly recovering as construction adds supply,” the group wrote in a note. “However, if economic growth continues to surprise to the upside, then we believe the risk of mortgage rates remaining higher for longer will also increase.”
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