Mortgage rates continued their upward trend this week, nearing 7% and piling on the unaffordability crisis that threatens to dampen the typical spring buying frenzy.
Freddie Mac’s latest Primary Mortgage Market Survey released Thursday showed that the average rate on the benchmark 30-year fixed mortgage climbed to 6.9% this week, up from 6.77% last week. The average rate on a 30-year loan was 6.50% a year ago.
The rate on the 15-year fixed mortgage also increased, averaging 6.29% after coming in last week at 6.12%. One year ago, the rate on the 15-year fixed note averaged 5.76%.
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“Historically, the combination of a vibrant economy and modestly higher rates did not meaningfully impact the housing market,” Freddie Mac chief economist Sam Khater said in a statement. “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.”
Buying activity tends to pick up in the spring following slower winter months, but elevated rates and sky-high home prices have stalled the housing market as more would-be buyers and sellers are priced out or opting not to move.
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“Recent surges in new listing activities suggested that we might have a busy spring ahead,” said Realtor.com economist Jaiyi Xu. “However, the recent increase in mortgage rates has the potential to slow the market by disrupting the plans of many buyers, especially in a market where a significant number of consumers are anticipating lower mortgage rates, not higher.”
Robert Frick, a corporate economist at Navy Federal Credit Union, says rates are climbing because the futures markets have temporarily lost faith in the Federal Reserve cutting the federal funds rate soon, and in a “higher for longer” scenario that means higher mortgage rates, too.
“But market expectations can turn on a dime, and are always just one Fed meeting or data drop away from shifting,” Frick told FOX Business. “We saw that mortgage rates around 7% in January actually boosted existing home sales, and if rates fall below 6% this year, as many forecast, home sales volume should accelerate.”
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