A house with a downward facing arrow pointing to a percent sign.
Illustration by Lanette Behiry/Real Estate News

Mortgage rates level off but remain above 7% 

The 30-year fixed-rate mortgage averaged 7.18% this week, dropping for the first time in five weeks.

August 31, 2023
2 minutes

Key points:

  • Upcoming economic data and the September meeting of the Federal Reserve should provide clarity on where rates go next.
  • If inflation continues to cool, rates are expected to trend downward.
  • Mortgage applications ticked up this week, but the increase may be short-lived.

After a five-week surge, mortgage rates finally dipped this week, but whether they continue to fall will depend on several economic factors.

The 30-year fixed-rate mortgage averaged 7.18% this week, according to the latest survey from Freddie Mac. That's down from 7.23% a week ago but still represents a more than two-decade high. The 15-year fixed-rate was unchanged at 6.55%.

The latest figures from Mortgage News Daily may offer a ray of hope for would-be buyers: The 30-year fixed-rate was averaging 7.07% on Aug. 31, down significantly from 7.49% just a few days ago, suggesting that rates could ease further. Matthew Graham, chief operating officer at Mortgage News Daily, noted that the August jobs report on Friday could influence mortgage rates going forward.

"Weaker economic data leads to lower rates, all other things being equal," Graham noted in an online analysis.

The August jobs report, which was released on Sept. 1, showed 187,000 jobs were added for the month. That beat many analysts' expectations but was tempered by a downward revision of the July numbers.

Still, the trajectory for mortgage rates is far from certain, said Sam Khater, Freddie Mac's chief economist.

"Recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes," Khater said.

Will homebuyers adjust to rates above 7%? When mortgage rates topped 7% last fall for the first time in decades, buyers held off and inventory began to build, said Bright MLS Chief Economist Lisa Sturtevant. That inventory vanished in the spring when rates were down slightly.

"This time could be different. Rates above 7% are coupled with home prices that are at near record highs," Sturtevant said. "The desire for homeownership is still strong, but there are going to be more and more prospective buyers for whom the numbers simply don't pencil out anymore at 7%+ rates."

Despite elevated rates, mortgage applications ticked up 2.3% this week, according to the Mortgage Bankers Association. Applications are still down 27% from a year ago.

It was the first increase in five weeks, but Sturtevant doesn't expect the trend to continue heading into fall, predicting that applications will "decline significantly in the weeks ahead."

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