A house with an arrow pointing up to reflect rising mortgage interest rates.
Illustration by Lanette Behiry/Real Estate News

Mortgage rates tick back up after a six-week decline 

The 30-year fixed rate increased to 6.42% after nudging down to 6.27% the previous week, ending a six-week downward trend.

December 29, 2022
2 minutes

Key points:

  • The Federal Reserve has raised overall interest rates since March to bring down inflation, which hovers at 7%. Higher borrowing rates have followed.
  • Economists say they do not expect conditions to improve until inflation is brought under control.
  • “Transactions are fully submerged under a blanket of snow,” said Realtor.com senior economist George Ratiu, adding that higher rates are a barrier to home sales.

Mortgage rates inched up after declining for six straight weeks, Freddie Mac reported

Higher costs for home loans will keep the housing market "in the doldrums," said Sam Khater, chief economist at Freddie Mac. 

Mortgage rates climbed to an average of 6.42% Thursday, after dipping to 6.27% on Dec. 22, which is double what it was this time last year. 

Khater and other economists said Thursday that they do not expect conditions to improve anytime soon. "While the intensity of weakness is moderating, the market continues to decline and forward leading indicators suggest housing will remain weak throughout the winter," Khater said.

Even as mortgage rates dipped during the Thanksgiving and Christmas holidays, the declines did not appear to convince a substantial number of buyers to return to the market.

"For homebuyers and sellers, today's mortgage rates remain a significant barrier to successfully closing transactions," said George Ratiu, senior economist with Realtor.com. "Contract signings and sales of existing homes have been declining for most of 2022, and transactions are fully submerged under a blanket of snow."

Potential sellers are also keeping their homes off the market, worried about higher mortgage rates on their next home purchase.

"Many of those homeowners are carefully weighing their options as more than two-thirds of current homeowners have a fixed mortgage rate of below four percent," Khater said.

Bright MLS chief economist Lisa Sturtevant noted that the mortgage rate increase is the largest since the end of October. "The increase in rates reflects ongoing volatility in the mortgage market and uncertainty about future rate increases by the Fed," she said.

Sturtevant noted persistent "affordability challenges" in the current housing market, particularly for first-time buyers and people on moderate incomes. The median home price rose about 40% in the past three years, with monthly payments often doubling. 

Although the monthly payment for a median-priced home is now about $160 lower than it was two months ago, the savings "does not erase the impact of rapidly rising rates and prices that have pushed out many would-be homeowners out of the market," Sturtevant said.

Ratiu predicts market volatility to continue until the economy stabilizes. "With the Fed committed to monetary tightening until inflation is decidedly moving toward 2%, borrowing costs will remain elevated, keeping housing affordability at the top of the year's list of challenges," he said.

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