REAL ESTATE NEWS:

Mortgage Rates Rise to Nearly 3-Month High

Rates on 30-year mortgages rose to 6.54% from 6.44% last week, Freddie Mac said. Borrowing costs on 15-year fixed-rate mortgages rose to 5.71% from 5.63%.

What’s up with mortgage rates?

The average rate on a 30-year mortgage in the U.S. surged to 6.54% this week, adding pressure on home buyers facing sky-high prices and a limited supply of houses for sale.

The rate ticked up from 6.12% three weeks ago, A year ago, the rate averaged 7.57%.

four weeks ago, the average rate slipped to its lowest level in two years – 6.08% – boosting home shoppers’ purchasing power as they navigate a housing market with prices near all-time highs.

The average rate on a 30-year mortgage is still well below the 7.22% it hit in May, its 2024 peak. Until the past two weeks, rates had been mostly declining since July in anticipation of last month’s move by the Federal Reserve to cut its main interest rate for the first time in more than four years.

Fed officials also signaled they expect further cuts this year and in 2025 and 2026. The rate cuts should, over time, lead to lower borrowing costs on mortgages.

The average rate on a 30-year mortgage rose from below 3% in September 2021 to a 23-year high of 7.8% last October. That coincided with the Fed increasing its benchmark interest rate to fight the inflation that took hold during the COVID-19 pandemic.

When mortgage rates rise they can add hundreds of dollars a month in costs for borrowers. The housing market has been in a sales slump since 2022 as elevated mortgage rates discouraged many would-be homebuyers. Sales of previously occupied U.S. homes fell in August even as mortgage rates began easing.

Economists generally expect mortgage rates to remain near their current levels, at least this year. Fannie Mae projects the rate on a 30-year mortgage will average 6.2% in the October-December quarter and decline to an average of 5.7% in the same quarter next year.

When mortgage rates increase they can add hundreds of dollars a month in costs for borrowers. The average rate has now risen four weeks in a row. It hasn’t been this high since August 1, when it was 6.73%.

Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy decisions and data on inflation and the economy.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, also increased this week. The average rate rose to 5.71% from 5.63% last week and 5.25% three weeks ago. A year ago, it averaged 7.03%, Freddie Mac said.