Spring homebuying season meets a stubborn 6.37% mortgage rate

Body

Mortgage rates rose again this week, returning the average 30-year fixed rate to where it was four weeks earlier as bond markets fluctuated and inflation concerns persisted, Freddie Mac said Thursday.

Freddie Mac reported that the benchmark 30-year fixed-rate mortgage averaged 6.37%, up from 6.30% last week. The 30-year rate remains below where it was one year ago, when the rate averaged 6.76%, but Freddie Mac said the latest increase marked the second straight weekly rise.

The shift in long-term borrowing costs affects what homebuyers can afford, because higher mortgage rates can add hundreds of dollars per month to monthly payments for some buyers, Freddie Mac said.

Freddie Mac also said borrowing costs for a commonly used refinancing option increased. It reported that the average 15-year fixed-rate mortgage rose to 5.72% from 5.64% last week. A year earlier, Freddie Mac said, the 15-year rate averaged 5.89%.

Freddie Mac tied mortgage rate moves to the bond market, saying the average 30-year mortgage rate reflects the trajectory of U.S. 10-year Treasury yields that lenders use as a pricing guide. In FRED’s vintage data for this publication date, the 10-year Treasury yield was 4.36% in midday trading Thursday.

Freddie Mac said the recent volatility comes amid inflation worries linked to surging oil prices tied to the war with Iran. It also pointed to a longer run of rate movement: as recently as late February, the average 30-year mortgage rate had slipped just under 6% for the first time since late 2022, and it has not fallen below that threshold since.

The rate outlook is arriving at the start of the spring homebuying season, traditionally one of the busiest periods for the housing market, but Freddie Mac said economic fallout from the conflict has contributed to a lackluster start. Sales of previously occupied U.S. homes were down from a year earlier in the first three months of the year, extending a nationwide housing slump that dates back to 2022 as mortgage rates climbed from pandemic-era lows.

Lisa Sturtevant, chief economist at Bright MLS, said in a quote carried by the report that “The expectation of rates below 6% this spring has disappeared, and buyers and sellers likely will face rates in the mid-6% range into the summer.”

Even with rates higher, the report said some buyers may benefit from buyer-friendlier trends in many markets. Realtor.com data cited by Freddie Mac said the number of homes for sale rose 4.6% from a year earlier last month, as properties took longer to sell. It also said list prices fell in April from a year earlier for the sixth month in a row.