A house against a backdrop of fluctuating graphs and lines
Illustration by Lanette Behiry/Real Estate News; Shutterstock

Some positive signs for mortgages, but are rate cuts at risk? 

Mortgage applications jumped nearly 10% as rates hold fairly steady, but higher-than-expected inflation numbers could spoil the party.

January 11, 2024
2 minutes

While wintry weather blasts most of the nation, mortgage applications are heating up — but an unwelcome inflation update could chill hopes of interest rate cuts in 2024.

What's happening with mortgages? Mortgage applications had a good week, jumping 9.9% from the previous week "despite an uptick in mortgage rates to start 2024," said Joel Kan, deputy chief economist for the Mortgage Bankers Association, which tracks this data.

Kan called it a promising start to the year, but tempered enthusiasm by adding that it was "likely due to some catch-up in activity after the holiday season and year-end rate declines. Mortgage rates and applications have been volatile in recent weeks and overall activity remains low."

While mortgage rates have seen their share of ups and downs, they have held fairly steady since late December. The 30-year fixed-rate average was 6.66% this week, up slightly from 6.62% last week. Last year at this time, the rates averaged 6.33%. The 15-year average came in at 5.87%, down a hair from last week's 5.89%. 

"Mortgage rates have not moved materially over the last three weeks and remain in the mid-six percent range, which has marginally increased homebuyer demand," said Freddie Mac chief economist Sam Khater.

What's going on with inflation? December inflation numbers came in at 3.4%, which is 0.2% above what economists expected. Higher rents were identified as one of the main causes, and though consumers are optimistic about interest rate cuts, this inflation news could lead to more pain on the home front.

What does it mean for 2024? The Fed's target is 2% inflation, so this increase puts expected interest rate cuts at risk, experts say.

"These readings support the Fed's view that the policy stance should remain restrictive for some time," according to Rubeela Farooqi, chief economist at High Frequency Economics. "They also push back against pricing of imminent rate cuts."

The Federal Reserve meets on Jan. 30, and their next move could set the tone for the year.

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