Rates Resume Climb After Brief Stall

Mortgage rates resumed their upward march last week after briefly stalling.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.84%, up from the week prior’s 6.78%.

A year ago at this time, the 30-year fixed-rate mortgage averaged 7.29%.

Fifteen-year rates ticked up to 6.02% from 5.99%. A year ago at this time, they were at 6.67%.

“Mortgage rates ticked back up this week, continuing to approach 7%,” said Sam Khater, Freddie Mac’s Chief Economist. 

“Heading into the holidays, purchase demand remains in the doldrums. While for-sale inventory is increasing modestly, the elevated interest rate environment has caused new construction to soften.”

Housing starts slipped 3.1% last month to their slowest pace in three months, while single-family construction specifically declined even further.

Fannie Mae now expects existing home sales to increase just 4% through next year, a downward revision that factors in the recent rate run-up.

“[W]e expect inventories of homes added to the market, and therefore sales of existing homes, to remain subdued through next year, as the higher mortgage rate environment is likely to strengthen the ongoing lock-in effect,” Mark Palim, Fannie Mae Senior Vice President and Chief Economist noted.

“How these competing forces balance out is currently an open question, but for now we continue to expect affordability to remain the primary constraint on housing activity through our forecast horizon.”

Meanwhile, builders are focused on the political climate, hoping for regulatory changes from Donald Trump’s administration that they say would help boost affordability.

“With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments,” NAHB Chairman Carl Harris said.