Rates are climbing again after a prolonged fall during the summer – but buyers aren’t exactly panicking, according to a prominent mortgage broker
A slide in mortgage rates over the summer helped boost homebuyer confidence and spur an uptick in refinances – but they’re back on the rise again, hitting their highest level last week since July.
The average 30-year fixed-rate mortgage climbed to 6.84% at last reading, Freddie Mac said on Thursday, amid surging US Treasury yields and surprisingly strong economic data.
While rates are increasing again, there’s still a significant gap between the current 30-year fixed rate and its level at the same time last year (7.29%), and the trend hasn’t exactly cratered the US mortgage market.
Advice to clients in the current climate remains the same as when interest rates first spiked in 2022, according to Rebecca Richardson (pictured top), a Charlotte-based broker licensed in over 10 states. “Buying a home is always still a personal decision,” she told Mortgage Professional America. “Of course, we’d always like to pay less for things but if the timing is right, if [the buyer] can afford the payment, it’s about the hard math of buying a house.”
Nor have the questions borrowers should be asking themselves changed significantly, Richardson said: namely, whether the purchase makes sense and fits their budget, and whether it would meet the purpose of their buying a home.
Plenty of would-be buyers decided to hold back on their purchasing plans as rates shot upwards after 2021 – but while some held out hopes that borrowing costs would plunge again, Richardson said a growing acceptance is emerging that rates won’t hit the rock-bottom lows again of the COVID-19 pandemic.
“I think reality has set in,” she said, “because you can get the house, you can lock in the price of the home and the rate can be fixed later at some point with a refi.”
Mortgage demand saw a modest boost last week, with applications rising 1.7% despite the continued climb in interest rates, according to the Mortgage Bankers Association.https://t.co/RHgQmr5stS#mortgagetrends #mortgageapplication #housingmarket
— Mortgage Professional America Magazine (@MPAMagazineUS) November 20, 2024
Buyers increasingly unmoved by news of rising rates
The recent jump in rates may have dissuaded some potential buyers about pushing ahead with a move, but others are approaching the market with a bullish attitude and the realization that there’s never a perfect time to make a purchase, according to Richardson.
“Either they’ve just gotten tired of sitting on the sidelines – they don’t think the situation is going to change – or they’re just pragmatic about the fact that this is the situation,” she said. “‘This is where the market is and if I can pay less later, cool. But in the meantime, I’m tired of waiting.’”
The good news: while rates may be ticking upwards, there’s much more positivity about the market at present than last year, with some of the gloom of that rising-rate environment having dissipated.
Concerns about a potential resurgence in inflation and the impact of possible tariffs down the line mean it’s difficult to say what 2025 has in store for the economy. “But I think for the most part, later 2022 and 2023 were definitely more of a sticker shock [for borrowers],” Richardson said.
Then, a common question was: “What do you mean that rates aren’t 5%?” But now, “it’s like, ‘OK, we’re going to be in the sixes and sevens. At least we’re not at 8%,’” she said. “So there’s a little bit more perspective and relative understanding of what the market is doing.”
No indication of a housing market downturn despite climbing rates
The US housing market is also showing little signs of slowing, with existing-home sales seeing their first annual increase in more than three years in October.
The number of existing homes changing hands rose by 3.4% on a month-over-month basis and by 2.9% compared with October 2023, coming in at an annually adjusted rate of 3.96 million.
Sales increased in all four major US regions that month – and National Association of Realtors (NAR) chief economist Lawrence Yun suggested a big further increase in mortgage rates was unlikely, an especially welcome pronouncement for those hoping to purchase for the first time.
“For most first-time homebuyers, mortgage financing is critically important,” he said in remarks released alongside the association’s October sales data. “While mortgage rates remain elevated, they are expected to stabilize.”
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