The average long-term U.S. mortgage rate has risen slightly this week, reaching 6.82%. Despite this increase, the rate remains below 7%, where it has been for most of the year. This rise in rates can add hundreds of dollars to borrowers’ monthly costs, making it challenging for many Americans to afford homes in an already competitive market. Mortgage rates have been fluctuating in recent weeks, hovering just below where they were two weeks ago. After hitting a 23-year high of 7.79% in October, the rate has stayed below 7% since early December, but has not gone below the 6.6% average from January.
In late February, the rate reached 6.94% following strong reports on inflation, job market performance, and economic outlook. Analysts predict that mortgage rates may moderate this year, but only after the Federal Reserve begins lowering its benchmark interest rate. With the Fed signaling potential rate cuts this year, the bond market’s response to interest rate policy and other factors will influence mortgage rates. Freddie Mac’s chief economist, Sam Khater, does not expect rates to decrease significantly in the near future, despite signs of lower inflation.
The U.S. housing market is recovering from a 2-year sales slump caused by high mortgage rates and limited inventory. Since the peak of mortgage rates last fall, the decline has provided relief to homebuyers. Sales of existing homes rose in February to the highest level in a year, following an increase in January. However, the current average rate of 6.82% is still significantly higher than the rate two years ago at 4.72%. Many homeowners who purchased or refinanced their homes below 3% or 4% are hesitant to sell, contributing to a shortage of available homes.
The inventory of homes on the market is increasing, with active listings growing by nearly 24% in March compared to the previous year. This marks the fifth consecutive month of annual inventory growth, indicating a stronger supply of homes leading up to the spring homebuying season. Despite this improvement, there are still fewer options for home shoppers compared to before the pandemic, with active listings in March 2019 being nearly 38% higher. Homeowners looking to refinance their loans received some relief this week, as the average rate on 15-year fixed-rate mortgages dropped to 6.06% from 6.11% the previous week, and 5.64% a year ago.
