Mortgage rates again jumped closer to 7 percent over the last week upon the arrival of spring, which is generally the time of year when the housing market begins to percolate.
The 30-year fixed rate averaged 6.87 percent as of March 21, up from the previous week’s 6.74 percent.
“After decreasing for a couple of weeks, mortgage rates are once again on the upswing,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “As the spring home-buying season gets underway, existing home inventory has increased slightly and new home construction has picked up.”
The uptick in rates could discourage buyers from coming out as spring has arrived. But the latest data from the housing market has been encouraging, despite elevated borrowing costs.
Last month, the existing-homes market—which has struggled amid high rates—showed some signs of life, with sales coming in strong, up nearly 10 percent for February. Sales for new homes has also been robust, despite January’s activity, which was slower than expected.
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But high mortgage rates have hindered buyers. Mortgage applications declined for the week ending ending March 15 on the back of an uptick in borrowing costs. Experts blamed the jump in the cost of home loans on economic news suggesting that interest rates may stay higher for longer.
“After three weeks of declines, mortgage rates jumped to almost 7 percent last week as recent economic data continues to put upward pressure on rates, thus slowing borrower demand,” Mortgage Bankers Association’s President and CEO Bob Broeksmit said in a statement shared with Newsweek on Thursday. “As a result, mortgage applications declined slightly over the week, with purchase and refinance activity both posting declines.”
Some analysts suggest that the Federal Reserve indicating on Wednesday that it may institute three rate cuts this year could help lower borrowing costs and help bring down mortgage rates.
“Markets were most interested in the Fed’s projections for future rate cuts. In not so many words, those projections retained the Fed’s previous expectation of 3 rate cuts by the end of this year,” Matthew Graham, rates strategist and chief operating officer at Mortgage News Daily, noted. “This was a bit more hopeful than markets expected. As such, bonds improved and mortgage rates fell.”
Mortgage News Daily’s tracker for the 30-year fixed rate closed late Wednesday at 6.97 percent following the Fed’s meeting.
Freddie Mac’s Khater suggested that the outlook going forward looked optimistic, buoyed by increased confidence from builders.
“Despite elevated rates, homebuilders are displaying renewed confidence in the housing market, focusing on the fact that there is a good amount of pent-up demand, an ongoing supply shortage and expectations that the Federal Reserve will cut rates later in the year,” he said.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.