Rising Mortgage Rates Complicate Spring Outlook

Anticipated inflationary pressures are set to drive up borrowing costs just as the housing market gears up for its peak season.

Recent economic data has painted a picture of a delicate economy grappling with persistent inflation, nudging mortgage rates closer to the 7% mark. According to Freddie Mac's latest report, the average rate for a 30-year fixed-rate mortgage now stands at 6.88%.

Jessica Lautz, deputy chief economist at the National Association of REALTORS®, likens predicting mortgage rates to shaking a Magic 8 Ball, with the current outlook suggesting a disappointing rise in the weeks ahead, dampening the spirits of springtime home buyers.

The impact of the higher-than-expected inflation figures released on Wednesday, which saw the Consumer Price Index (CPI) climb to 3.5% in March, is expected to ripple through the mortgage market gradually. NAR Chief Economist Lawrence Yun has hinted that rates could breach the 7% threshold in response to this inflationary pressure.

Prospective home buyers this season are likely to encounter steeper borrowing costs compared to a year ago, potentially deterring some from entering the market. With a 20% down payment on a $400,000 home, the typical monthly mortgage payment would now be $2,366 at the current 6.88% rate, notes Lautz. This may pose challenges, particularly for first-time buyers who lack housing equity to offset these costs.

Freddie Mac's latest data reveals the following national averages for mortgage rates:

A. 30-year fixed-rate mortgages: averaged 6.88%, up from last week's 6.82% and significantly higher than the 6.27% average from the same period last year.
B. 15-year fixed-rate mortgages: averaged 6.16%, climbing from last week's 6.06% and surpassing the 5.54% average from a year ago.