Mortgage rates tick up as economy continues to show strength
The 30-year fixed-rate mortgage averaged 6.71% this week, snapping three straight weeks of declines.
Key points:
- With the job market remaining strong, inflation will be tough to tame, which could mean two more interest rate hikes from the Fed in 2023.
- Even with affordability challenges, demand for homes has not been significantly dampened.
Mortgage interest rates reversed their steady decline this week, a sign that the housing market may continue to feel some bumps heading into the second half of the year.
The 30-year fixed-rate mortgage averaged 6.71% for the week, according to the latest Freddie Mac survey. That's up from last week's 6.67% and snaps a three-week streak of small declines. A year ago the rate was at 5.7%.
The slight rise could be a result of the Federal Reserve's continuing signals that more interest rate hikes are on the horizon, said Realtor.com economist Jiayi Xu — though she still expects to see a drop in rates as the year progresses.
"While [Fed actions] may pose near-term upward pressure on interest rates, including for mortgage rates, we expect a gradual decline that could bring rates near 6% by year-end," Xu said.
It's looking like the Federal Reserve is planning to raise interest rates two more times in 2023, said George Ratiu, chief economist at Keeping Current Matters. That's because much of the economy is still performing stronger than expected, keeping the inflation rate higher than the Fed would like.
With elevated mortgage rates now in place for about a year, buyers appear to have adjusted to rates in the 6-7% range despite the affordability challenges it brings.
"Higher mortgage rates have not dampened demand as much as many had forecasted," said Lisa Sturtevant, chief economist at Bright MLS. "While home prices have fallen in some markets and sellers are having to drop their asking prices, that is not the case everywhere. In many markets, prices have remained firm or have continued to rise, and sellers still have the upper hand."
Mortgage applications rose 3% this week, according to the Mortgage Bankers Association. Applications are now at the highest level since early May, but remain more than 20% lower than a year ago, said Joel Kan, MBA's deputy chief economist.
The 15-year fixed-rate mortgage averaged 6.06%, up from last week when it averaged 6.03%. A year ago at this time, the 15-year fixed-rate mortgage averaged 4.83%.