Mortgage rates up slightly following jobs report, Fed rate hike
Volatility may be the norm for the near future, but mortgage interest rates remain down significantly from their November peak.
- The Freddie Mac survey average rate now sits at 6.12%, up from last week’s 6.09%.
- The unexpectedly strong jobs report was listed as a factor in the slight increase.
- If rates remain near this level for the coming weeks, it could lead to increased homebuying demand.
Mortgage interest rates ticked up slightly this week, but many economists are expecting some volatility heading into spring.
The 30-year fixed-rate mortgage averaged 6.12% according to the latest survey done by Freddie Mac. Last week's average was 6.09%.
"Following an interest rate hike from the Federal Reserve and a surprisingly strong jobs report, mortgage rates increased slightly this week," said Sam Khater, Freddie Mac's chief economist. "The 30-year fixed-rate continues to hover close to six percent, and interested homebuyers are easing their way back to the market just in time for the spring homebuying season."
Daily reports from other sources indicate that the rate is rising faster. In recent days, Mortgage News Daily has reported 30-year rates to be in the 6.3% range.
George Ratiu, Realtor.com's manager of economic research, said investors reacted to the stronger-than-expected jobs report as well as comments from the Fed that inflation will remain higher, requiring more monetary tightening.
"Mortgage rates are likely to continue moving up and down in a narrow range for the next few weeks," Ratiu said. "For housing markets, current rates remain a significant barrier to affordability, especially for first-time homebuyers."
At the same time, the strong jobs report and wage growth continues to provide some strength to the housing market, as shown by the rise in mortgage applications.
The Mortgage Bankers Association reported that applications for the week ending Feb.3 were up 7.4% compared to the previous week as buyers took advantage of the lower mortgage rates earlier this month.
"Both purchase and refinance applications increased last week and have shown gains in three of the past four weeks because of lower rates," said Joel Kan, MBA's deputy chief economist. "Overall applications remained 58% lower than a year ago and rates are still significantly higher, however, this week's results are a step in the right direction."
Rates hovering in the 6-6.5% range are starting to become the "new normal" for both buyers and sellers — particularly for buyers who are tired of waiting and eager to get back in the market, said Lisa Sturtevant, chief economist for Bright MLS.
"If rates continue to be in this range, we should expect strong market demand. Buyers should continue to shop rates as there will be a lot of variation in both rates and terms across lenders," Sturtevant said.
Longer-term, the Fed seems convinced that rates must go higher, and stay high for a few years, in order to "kill inflation," said Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
"But with a slew of leading indicators pointing to a slowing economy, the rapid deceleration of consumer price growth and falling inflation expectations, more aggressive policy tightening could drive the risk of recession higher and pull long term rates down again," Divounguy said, noting that next week's Consumer Price Index report will likely cause more mortgage rate volatility.