Rates Jump Again As Inflation Threatens To Stick Longer Than Expected

Mortgage rates have increased again as new data suggests inflation is sticking harder than previously thought.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage rate averaged 6.65%, up from 6.50% the week prior.

A year ago at this time, the 30-year FRM averaged 3.76%.

The 15-year fixed-rate mortgage rose from 5.76% to 5.89%. A year ago, it averaged 3.01%.

“As we started the year, the 30-year fixed-rate mortgage decreased with expectations of lower economic growth, inflation, and a loosening of monetary policy. However, given sustained economic growth and continued inflation, mortgage rates boomeranged and are inching up toward seven percent,” said Sam Khater, Freddie Mac’s Chief Economist. 

“Lower mortgage rates back in January brought buyers back into the market. Now that rates are moving up, affordability is hindered and making it difficult for potential buyers to act, particularly for repeat buyers with existing mortgages at less than half of current rates.”

January saw the fewest new listings ever recorded by Redfin excluding the start of the pandemic, as continued affordability pressures kept sellers locked into their current homes. 

Buyers are seeing some relief as home prices tick down, but for most, purchasing a home has been pushed out of reach by increasing rates and stubborn inflation.

Rates are expected to stay elevated and may move even higher if the Federal Reserve decides to continue hikes. 

Fed Governor Christopher Waller warned this week that the Fed may increase its key interest rate if “data reports continue to come in too hot.”

“Although inflation has been coming down since the middle of last year, the recent data indicate that we haven’t made as much progress as we thought,” he said in prepared remarks at the Mid-Size Bank Coalition of America, according to Business Recorder.

If trends continue as they are, Waller said he would endorse raising the federal funds rate to between 5.1% and 5.4%. The Fed predicted a 5.1% median rate in December, which was already slightly higher than anticipated.

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