Mortgage rates have continued to rise for the fourth week in a row, impacting demand within a stagnant housing market.
According to Freddie Mac’s latest Primary Mortgage Market Survey, released on Thursday, the average rate on a 30-year fixed mortgage increased to 6.54%, up from 6.44% the previous week. This marks a significant rise from the same time last year when rates were at 7.79%.
Sam Khater, Freddie Mac’s chief economist, noted that the ongoing strength in the economy has driven mortgage rates higher. He highlighted a persistent tension between the negative economic narrative and stronger-than-expected economic data, contributing to greater volatility in mortgage rates.
The uptick in mortgage rates has caused many potential buyers and sellers to hold off on transactions, with approximately 80% of mortgage holders currently benefiting from rates below 5%, according to a survey by Zillow. The average rate on a 15-year fixed mortgage also rose to 5.71%, up from 5.63% last week, while last year it averaged 7.03%.
This latest increase means that borrowers may face hundreds of additional dollars in monthly costs. The current average rate is the highest it has been since August 1, when it was recorded at 6.73%. As mortgage rates influence overall borrowing costs, their rise comes at a challenging time when home prices remain near record highs, despite a slowdown in the housing market since 2022.
The mortgage rate increases are influenced by various factors, including the bond market’s reaction to the Federal Reserve’s interest rate policies and economic data, which affect the 10-year Treasury yield. The yield on the 10-year Treasury was approximately 4.20% on Thursday, having risen from 3.62% in mid-September.
In the broader context of the housing market, sales of previously owned US homes slowed in September to their lowest annual pace in nearly 14 years, even as some mortgage rates eased. Conversely, sales of new homes increased by 6.3% year-over-year, with homebuilders responding to elevated rates by lowering prices and providing incentives to buyers.
Economists anticipate that mortgage rates will stabilize around current levels for the remainder of the year. Fannie Mae projects that the average rate on a 30-year mortgage will be around 6.2% for the fourth quarter of 2024 and may decrease to an average of 5.7% in the same period next year. Lisa Sturtevant, chief economist at Bright MLS, suggested that while a general decline in mortgage rates is expected in the coming months, short-term fluctuations remain likely.
With input from FOX Business and the Associated Press.
