Mortgage Rates Inch Up, Dampening Hopes for Immediate Rate Cuts

Recent increases in mortgage rates have further complicated the prospect of significant rate cuts for homebuyers in the near future. The average rate for a 30-year loan crept past 7% this week, settling at 7.07% on Wednesday, according to Mortgage News Daily. This uptick comes as a separate measurement tracking weekly average rates rose to 6.82% from 6.79%, according to Freddie Mac.

Homebuyer affordability has taken a hit, with the US median mortgage payment climbing 2% monthly in February and 6% annually to nearly $2,200, as reported by the Mortgage Bankers Association (MBA). These rising mortgage payments, influenced by both higher interest rates and home prices, have notably cooled buyer demand. As a result, the volume of home-purchase applications has remained unchanged this week and dropped 13% compared to the same week last year, according to MBA data.

Danielle Hale, chief economist at Freddie Mac, noted, “Elevated mortgage rates have been a persistent market challenge, holding back first-time homebuyers and repeat homebuyers alike, albeit for different reasons. In order for rates to decline meaningfully and sustainably, inflation needs to be convincingly on a path to the Fed’s 2% target.”

Despite these challenges, Fed Chair Jerome Powell remains optimistic about a rate cut later this year, as he recently assured the public that inflation is easing. However, expectations of a rate decline have diminished among investors, who now predict a smaller rate cut by the Federal Reserve compared to earlier forecasts.