Why Are Mortgage Rates Edging Closer to 7% Again?
Borrowing costs have been inching up for weeks, threatening to dampen the spring homebuying season.
Mortgage rates continued to climb this week, with the 30-year loan averaging 6.73%, Freddie Mac reports. Rates began climbing more than a month ago and are now prompting concerns that they could again head back above 7%. Still, economists are largely forecasting rates to trend downward in 2023, even if there are some blips ahead.
For now, “rates may rise further in subsequent weeks, depending on how strong other economic data is,” says Nadia Evangelou, senior economist and director of real estate research at the National Association of REALTORS®. “Jobs and inflation reports, coming soon, are two of the main drivers of today’s mortgage market.”
Also, the Federal Reserve is due to meet later this month to decide whether to continue raising its short-term rate. Mortgage rates are continuing “their upward trajectory as the Federal Reserve signals a more aggressive stance on monetary policy,” says Sam Khater, Freddie Mac’s chief economist. “Overall, consumers are spending in sectors that are not interest rate-sensitive, such as travel and dining out. However, rate-sensitive sectors, such as housing, continue to be adversely affected. As a result, would-be home buyers continue to face the compounding challenges of affordability and low inventory.”
The Fed’s benchmark rate may influence mortgage rates, but it does not have a direct impact on them.
Some buyers may be nervous about mixed economic news, which could dampen the market just as the spring homebuying kicks off. “There is certainly not a one-size-fits-all answer” to when it’s the best time to buy a home, Evangelou says. “Rates are significantly higher than the previous year, but they are still considered historically low.” Plus, if inflation eases faster than expected, mortgage rates could decrease to the low 6% range in the upcoming weeks, she adds.
Meanwhile, buyer competition has cooled in recent months. “Sellers continue to be willing to negotiate, as there is still less competition in the market than a year ago,” Evangelou says. “Inventory remains tight, but there are typically about 60% more new listings during March and August than the rest of the year.”
Freddie Mac reports the following national averages in mortgage rates for the week ending March 9:
- 30-year fixed-rate mortgages: averaged 6.73%, rising from last week’s 6.65% average. A year ago, 30-year rates averaged 3.85%.
- 15-year fixed-rate mortgages: averaged 5.95%, also rising compared to last week’s 5.89% average. A year ago, 15-year rates averaged 3.09%.
Source: National Association of REALTORS®