Mortgage rates rose to their highest since December, the Mortgage Bankers Association (MBA) said on Wednesday, contributing to depressed activity in the housing market.
The 30-year fixed rate ticked up to about 6.90 percent for the week ending February 9. Applications for mortgages also fell by 2.3 percent from a week earlier, according to the MBA, with buyers possibly balking at elevated rates that makes buying a home less affordable amidst high prices for properties in the market.
"Application activity was weaker last week, as mortgage rates moved higher across the board. The 30-year fixed mortgage rate was up to 6.87 percent—the highest rate since early December 2023," Joel Kan, MBA's deputy chief economist, said in a statement. "Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory."
On Tuesday, the housing market also suffered from investors' reaction to a higher than expected Consumer Price Index (CPI) inflation. Prices were up 3.1 percent, slower than last month but above the 2.9 percent that economists had anticipated.
Analysts took the news as a signal that the Federal Reserve, which had hiked its funds rate to a two-decade high of 5.25 to 5.5 percent to battle inflation, will take a while longer to begin reducing borrowing costs with prices still elevated.
This sentiment reverberated across the markets and sent bonds up, which in turn pushed up mortgage rates to above 7 percent by the end of the day, according to Mortgage News Daily News (MND).
"The bond market (which underlies mortgage rates) reacted immediately and forcefully when the numbers came out. Bonds continued to worsen as the day went on, leading many mortgage lenders to raise rates once or twice during the day," MDN's Matthew Graham wrote in a note. "The net effect is an average 30[-year] fixed rate that moved well into the 7s after being in the high 6's yesterday."
The rise in mortgage rates this week adds to their fluctuating start to the year. After hitting a peak of 8 percent in October, the highest level since the year 2000, they had been declining over the past two months. At one point, mortgage rates had come down to the mid-6 percent range over the last few weeks though recently there has been an upward trend.
The inflation data for January suggests that borrowing costs could move towards the higher 6 percent range, according to realtor.com's chief economist Danielle Hale.
"Mortgage rates are likely to hang on to the narrow range they've occupied since late December, while moving toward the upper end of that range," she said.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more