The average rate for a 30-year fixed mortgage in the US increased to 6.72% this week, marking the first rise in four weeks, according to Freddie Mac. This uptick follows a period of declining rates and comes on the heels of the Federal Reserve’s recent rate cut.
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The Federal Reserve lowered its benchmark rate on Wednesday for the third time since mid-September, yet signaled a more cautious approach to future adjustments. Projections for 2025 now indicate only two potential rate reductions, a decrease from previous estimates. Federal Reserve Chair Jerome Powell emphasized the need for further progress in curbing inflation, which currently remains above the central bank’s target. This shift in the Fed’s stance has impacted mortgage rates.
alt text: Federal Reserve Building
Impact of Federal Reserve Actions on Mortgage Rates
Kara Ng, senior economist at Zillow Home Loans, commented on the Fed’s announcement, stating, “This may be the last easy cut for a while. Moving forward, the Fed and markets will likely be in reaction mode to incoming economic data and policy announcements.” This suggests a period of uncertainty and potential volatility for mortgage rates in the coming months. Ng advises, “Homebuyers should expect mortgage rates to continue on their bumpy path and be ready to act when an opportunity arises.” This underscores the importance of staying informed and prepared for fluctuations in the mortgage market.
Housing Market Activity Amidst Rate Changes
Despite the recent rise in mortgage rates, the housing market has shown signs of resilience. The National Association of Realtors reported that sales of previously owned homes in the US accelerated last month to their highest pace since March. These sales largely reflect purchases initiated in September, when 30-year mortgage rates reached a two-year low. This surge in activity indicates that lower rates earlier in the fall significantly influenced buyer behavior.
Danielle Hale, chief economist for Realtor.com, attributes the increased sales activity to the previous decline in mortgage rates. “That decline brought shoppers to the market,” Hale explains, “and the late September surge in rates created a sense of urgency that likely contributed to the uptick.” This suggests that buyers were motivated to capitalize on the lower rates before they potentially rose again. The current increase in rates may moderate buyer enthusiasm in the coming weeks.
Mortgage Rate Outlook and Buyer Behavior
According to Sam Khater, Freddie Mac’s chief economist, the current mortgage rates are comparable to those seen around the same time last year. “For the most part, mortgage rates have moved between 6% and 7% over the last 12 months,” Khater noted. This indicates a relatively stable range for mortgage rates over the past year, despite recent fluctuations.
Khater also observes that “Homebuyers are slowly digesting these higher rates and are gradually willing to move forward with buying a home.” This suggests that while higher rates may present a challenge, they haven’t completely deterred buyers from entering the market. The continued activity in the housing market points to underlying demand, even in the face of fluctuating interest rates. The long-term impact of these rate changes on the housing market remains to be seen.
