Could slowly climbing borrowing costs hamper the upcoming spring homebuying season?
Strong economic data and stubbornly high inflation pushed mortgage rates up for the fourth consecutive week, giving buyers whiplash after weeks of declines prior. The 30-year fixed-rate loan averaged 6.65% this week, according to Freddie Mac. “Higher mortgage rates have a direct impact on borrowing costs, hurting affordability,” says Nadia Evangelou, senior economist and director of real estate research at the National Association of REALTORS®. “At today’s rate, buyers need to put more than 20% down if they don’t want to be cost-burdened.”
Mortgage rates are about double what they were a year ago. Still, the latest housing data indicates market resilience and suggests activity will pick up in the coming months, Evangelou says. There already are signs of a possible turnaround: Pending home sales rose significantly in January, the second consecutive month of gains, NAR reported earlier this week.
However, home buyers are having to digest mortgage rates that are now boomeranging and inching back up toward 7%, adds Sam Khater, Freddie Mac’s chief economist. “Lower mortgage rates back in January brought buyers back into the market,” Khater says. “Now that rates are moving up, affordability is hindered and making it difficult for potential buyers to act, particularly for repeat buyers with existing mortgages at less than half of current rates.”
Rate relief could be on the horizon. If inflation eases faster than expected, mortgage rates could decrease to the low 6% range over the upcoming weeks, Evangelou says.
Freddie Mac reports the following national averages with mortgage rates for the week ending March 2:
- 30-year fixed-rate mortgages: averaged 6.65%, rising from last week’s 6.5%. A year ago, 30-year rates averaged 3.76%.
- 15-year fixed-rate mortgages: averaged 5.89%, up from last week’s 5.76%. A year ago, 15-year rates averaged 3.01%.