Mortgage rates have surged for the third consecutive week and are now inching closer to 7%, reflecting the consensus data from Freddie Mac. The 30-year fixed-rate mortgage averaged 6.90% in the week ending February 22, up from 6.77% the previous week. Even though mortgage rates had previously been making smaller moves after reaching a peak of 7.79% in October, they seem to be trending higher lately due to indications from the Federal Reserve that it will not cut its benchmark rate until later this year. With economic and inflation data causing the market to re-evaluate the path of monetary policy, many would-be homebuyers expecting rates to cool off this year are now hesitant to enter the market.
As a result of the surge in mortgage rates, many homebuyers who were anticipating lower rates this year are reconsidering their plans, causing a drop in mortgage applications. The recent increase in mortgage rates has the potential to disrupt the plans of many buyers, especially in a housing market where numerous consumers were eagerly waiting for lower mortgage rates. Even though statements from Federal Reserve officials have acknowledged the potential for rate cuts in 2024, they are hesitant to rush into any decisions without concrete evidence of sustained improvement in inflation. The current scenario is creating a sense of instability and hesitancy among homebuyers who are sensitive to even minor shifts in affordability.
Looking forward, the release of updated economic projections and discussions in March by the Federal Open Market Committee might provide more insights into the Fed’s approach. However, the surge in mortgage rates has the potential to slow down the housing market, disrupting the plans of many homebuyers and causing a drop in mortgage applications.
