A modern home with an upward trending arrow and a percentage sign
Illustration by Lanette Behiry/Real Estate News

Spring kicks off with rising mortgage rates 

Homebuyers may have more choices, but financing continues to be challenging.

March 21, 2024
3 minutes

Key points:

  • The 30-year fixed-rate mortgage averaged 6.87% this week, up from 6.74% a week ago.
  • Rates are expected to remain elevated following the Fed’s decision to delay rate cuts during its March meeting.
  • But repeat buyers are less likely to be deterred, and fresh inventory could boost sales activity.

Inventory might be blooming this spring, but homebuyers who want to close a deal may need to reset expectations around interest rates.

Last week's sizable dip may have left buyers hoping for further declines, but the seesaw trend in rates appears to be continuing. The 30-year fixed-rate mortgage averaged 6.87% this week, according to the latest Freddie Mac survey. That's up from 6.74% a week ago and 6.42% at the start of spring last year.

The 15-year rate was also up, averaging 6.16%.

Mortgage rates are expected to remain around this level as the spring homebuying season ramps up, following the Federal Reserve's decision to hold steady on interest rates at its March 20 meeting. 

For now, the agency is leaning toward three rate cuts in 2024, a sign that mortgage rates will go down later this year. Even so, economists are adjusting their forecasts. Researchers at Fannie Mae, for example, expect interest rates to be around 6.4% at the end of 2024. They previously predicted the rate would fall below 6% by December.

Economists are also rethinking the number of cuts the Fed will make over the next two years. "While the projections for the policy rate at the end of 2024 have not changed, policy makers do expect fewer rate cuts in 2025 and 2026 than they anticipated just 3 months ago — in other words, 'higher for longer,'" said Danielle Hale, Realtor.com's chief economist.

Repeat buyers more likely to enter the market

While most buyers are sensitive to interest rates, the continuing rate fluctuations aren't expected to fully dampen activity this spring. Agents should expect more repeat buyers — ones who are selling a home while buying a new one — in the coming months, said Lisa Sturtevant, chief economist at Bright MLS. 

For those in a position to buy, more choices are now available. In its weekly market report, Redfin found that the number of homes for sale rose 5% during the four weeks ending March 17. That's the biggest year-over-year uptick since last May. New listings (up 15.1% year-over-year) and months of supply (3.4, up from 3 a year ago) also point to more inventory.

But if mortgage rates remain elevated, momentum could slow as homeowners revert to the behavior seen for the past two years and hold on to their ultra-low interest rates, said Ruben Gonzalez, chief economist at Keller Williams. He's expecting home sales to remain subdued throughout the spring and for the rest of 2024.

"The start of a downward trend in mortgage rates would stimulate noticeable buyer activity but may not bring a proportional increase in listings. In that case, we could expect to see an acceleration in home price appreciation," Gonzalez said.

Applications down

Mortgage applications decreased 1.6% this week, according to the Mortgage Bankers Association. That halted the upward trend taking place in recent weeks.

With housing supply low and prices high, the average loan size for purchase applications rose to the highest level since May 2022, said Joel Kan, MBA's deputy chief economist.

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