Mortgage rates rise for the fourth week in a row

Washington, D.C. (CNN) Mortgage rates climbed for the fourth straight week as inflation concerns persist.

The 30-year fixed-rate mortgage averaged 6.65% in the week ending March 2, down from 6.5% the previous week, according to Freddie Mac data released Thursday. A year ago, the 30-year fixed rate was 3.76%.

Rates had trended lower after hitting 7.08% in November, but they are now rising, up about half a percentage point in a month. Strong economic data continues to suggest that the Federal Reserve is not done with its battle to cool the US economy and will likely continue to raise its benchmark lending rate.

“At the start of the year, the 30-year fixed rate mortgage declined on expectations of weaker economic growth, inflation and an easing of monetary policy,” said Sam Khater, Freddie Mac’s chief economist. “However, given the sustained economic growth and continued inflation, mortgage rates have skyrocketed and are approaching 7%.”

January’s rate cut brought buyers back into the market, Khater said.

“Now that rates are rising, affordability is hampered and it’s difficult for potential buyers to take action, especially for repeat buyers with existing mortgages at less than half of current rates,” he said. .

The average mortgage rate is based on the mortgage applications Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who have a 20% down payment and have excellent credit. Many buyers who put less money up front or have less than ideal credit will pay more than the average rate.

Inflation is expected to stay high for longer

The benchmark rate continued to climb, building on the momentum of the past few weeks, as the 10-year Treasury bond hit 4% this week.

The Fed does not directly set the interest rates that borrowers pay on mortgages, but its actions influence them. Mortgage rates tend to follow the yield of 10-year US Treasury bonds, which move based on a combination of anticipation of Fed actions, what the Fed is actually doing, and investor reactions. When Treasury yields rise, mortgage rates also rise; when they fall, mortgage rates tend to follow.

“Investors expect inflation to stay elevated for longer, forcing the Federal Reserve to continue raising its key rate,” said George Ratiu, senior economist at “The Fed has signaled that it sees its monetary tightening having an effect on price growth, but with a strong job market, wages are encouraging consumers to spend.”

Meanwhile, Ratiu said, consumers took on a record amount of debt, including mortgages, personal, auto and student loans.

“The personal savings rate has fallen significantly from the peak of the pandemic as high prices have weighed on household budgets,” he said. “As interest rates rise, finance costs are expected to rise, making consumer choices more difficult in the months ahead.”

Mortgage applications fall due to rising rates

The brief surge in mortgage and home buying activity in January as rates fell has come to an end, with mortgage applications falling last week to a 28-year low, according to the Mortgage Bankers Association.

“The recent jump in mortgage rates has resulted in lower purchase requests, with activity down for three straight weeks,” said Bob Broeksmit, CEO of MBA. “After strong gains in buying activity at the start of 2023, higher rates, continued inflationary pressures and economic volatility are causing some potential buyers to think twice before entering the housing market.”

Rates are trending up and could even reach 7% again in the next two months, Ratiu said.

“For real estate markets, rising rates mean higher mortgage payments, compounding the affordability challenge just as we enter crucial spring home-buying season.”

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