Weekly Mortgage Rates Swing Up Again

Freddie Mac has released its latest weeklyPrimary Mortgage Market Survey (PMMS), showing the 30-year fixed-rate ticked up to 6.32% due to strong economic numbers, such as rising consumer spending. 

“Mortgage rates moved up for the second consecutive week,” said Sam Khater, Freddie Mac’s Chief Economist. “The economy is showing signs of resilience, mainly due to consumer spending, and rates are increasing. Overall housing costs are also increasing and therefore impacting inflation, which continues to persist.” 

As of Feb. 16, the 30-year fixed-rate mortgage averaged 6.32%, up form last week when it averaged 6.12%. A year ago, it stood at 3.92%. 

The 15-year fixed-rate averaged 5.51%, an increase from last week when it stood at 5.25%. A year ago, it averaged 3.15%. 

Bright MLS Chief Economist Dr. Lisa Sturtevant had the following comments on today’s Mortgage Rates released by Freddie Mac: 

“Mortgage rates ticked up for the second week in a row. The average rate on a 30-year fixed rate mortgage hit 6.32%, up 0.2 percentage points from a week ago, the biggest weekly jump in over four months.” 

“Based on January’s inflation report, the Fed will keep raising the Federal Funds rate, which will likely drive borrowing costs, including mortgage rates, higher in the weeks ahead. This could lead to more cash buyers in the market this spring. In the first six weeks of 2023, about a quarter of home sales transactions in the Mid-Atlantic were all-cash sales. Over the same period last year, just 20% of transactions were all-cash deals.” 

“Rates are now back to the levels they were in early December when demand had stalled. For buyers who need to finance their home purchase, especially first-time buyers who often struggle with saving for a down payment, higher rates could cause them to wait. However, although higher mortgage rates might cast a slight shadow over the spring housing market, there is enough pent-up demand competing over relatively few homes to lead to stable or even rising prices in many local markets.” 

“Due to this pent-up demand, a lot of people will accept that rates above 6% constitute the ‘new normal’ in the housing market. Prospective homebuyers might be surprised by the level of competition in the market, where they are competing with cash buyers as well as other traditional buyers for very low inventory.” 

Realtor.com Manager of Economic Research George Raitu also commented on the news: 

“The Freddie Mac fixed rate for a 30-year loan continued rising after last week’s rebound, with a 20 basis point jump to 6.32%, following the climb in the 10-year Treasury. Investors are digesting the latest economic data, including the positive numbers released this week, such as retail sales, the Consumer Price Index, and the indices for small-business optimism and homebuilder sentiment.” 

“While the Fed signaled that it will continue to raise rates this year, the moves are expected to come in 25 basis point increments, a less aggressive tightening than what we saw in 2022. The central bank is acknowledging that it sees its monetary actions having a tangible effect on inflation. The CPI data out this week seems to confirm the bank’s views.” 

“At the same time, many companies continue to expect the economy to enter a recession, as a result of the Fed’s rate hikes, even in the face of data pointing to continued resilience. This expectation is becoming more visible in the growing number of companies resorting to layoffs as a hedge against a potential economic slowdown. The real challenge may come from companies’ reaction, as a rising number of people losing their jobs may turn expectations into a self-fulfilling prophecy. People who are laid off pull back on spending, and even those who are still employed may begin to do the same due to worries about losing their job, thus potentially sending consumer spending into a downward spiral.” 

“Mortgage rates are going to move in the 6% - 7% range over the next few weeks. For housing markets, the rebound in rates translates into higher mortgage payments from a year ago, but lower than the summer 2022 peak of the market, because prices have dropped 11% over the past 7 months. The buyer of a median-priced home is looking at a $1,985 monthly payment at today’s rate, 42% higher than last year, yet 6% lower than it would have been in June 2022.” 

Read the full report from The M Report here