The average rate for the popular 30-year fixed mortgage surpassed 7% on Monday, marking the first time since December, as reported by Mortgage News Daily.
This increase follows the most significant surge in over a year that occurred on Friday, spurred by the January employment report, which exceeded expectations. The upward momentum continued on Monday after a monthly manufacturing report also revealed higher-than-anticipated figures.
The rollercoaster ride of mortgage rates since the summer saw a brief climb to a 20-year high of 8% in October, followed by a sharp decline. Investors responded to mounting evidence suggesting the Federal Reserve’s inclination to conclude its latest phase of interest rate increases.
Keeping Track of it All
While mortgage rates do not directly mirror the Fed’s actions, they loosely track the yield on the 10-year Treasury, heavily influenced by the central bank’s perception of the economy.
Matthew Graham, Chief Operating Officer at Mortgage News Daily, commented on the recent rate spike, stating, “The rapid increase in rates over the past two days is actually not too surprising given the fact that the market was widely seen as overly optimistic on the Fed rate cut outlook.”
As mortgage rates declined in the past two months, homebuyers appeared to re-enter the market, coinciding with a slight increase in the number of homes available for sale. However, overall inventory remains historically low, fueling intense competition and sustaining high home prices.
A Bright 2024?
Despite the challenging conditions in 2023, with high prices and low supply, experts predict a more favorable outlook for 2024. Michael Fratantoni, Chief Economist at the Mortgage Bankers Association, emphasized the positive impact of a strong job market on the spring buying season but cautioned that mortgage rates may not see significant decreases.
Mortgage applications for home purchases had been on a steady rise but dipped in recent weeks as mortgage rates inched higher. With the approaching spring housing market, the importance of rates is heightened, especially considering the persistently high and rising home prices.
The National Association of Realtors reported that the median price of an existing home sold in December was $382,600, reflecting a 4.4% increase from December 2022. This marked the sixth consecutive month of year-over-year price gains, with the full-year median price reaching a record high of $389,800.
Given the elevated home prices, even minor fluctuations in interest rates significantly impact monthly payments, influencing affordability. Looking ahead to 2024, Matthew Graham highlighted the uncertainty, stating, “The future of rates in 2024 is all about ifs and thens,” emphasizing the potential impact of economic data and inflation on the mortgage rate outlook.