Economists weigh in on new trend
Mortgage rates showed little movement this week, but lock volume continued to rise as buyers seek to beat further increases.
Freddie Mac reported that the average 30-year fixed-rate mortgage (FRM) continues to hover near 7%, currently at 6.82%. This figure represents a slight increase from last week’s average of 6.79%. A year ago, the 30-year FRM average was significantly lower at 6.28%.
“Since the start of 2024, the 30-year fixed-rate mortgage has not reached 7% but has not dropped below 6.6% either,” Freddie Mac chief economist Sam Khater said. “While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near term. On the plus side, inventory is improving somewhat, which should help temper home price growth.”
The 15-year FRM averaged 6.06% this week, down from 6.11% the prior week. A year ago, the 15-year rate stood at 5.64%.
“This week’s rise in mortgage rates can’t be attributed to one or two data points,” said Holden Lewis, NerdWallet’s home and mortgage expert. “The increase is brought on by a general feeling that the economy is more resilient than expected. After 11 Fed rate hikes, companies are still hiring, and inflation is sticking around. Consequently, mortgage rates keep hovering around 7%.”
Mortgage lock volume growth
Despite the challenges posed by higher rates, mortgage lock volume - an indicator of home purchase activity - continued rising in March, up 15.36% from the prior month, according to the latest MCT Indices Report.
Andrew Rhodes, head of trading at MCT, commented: “Even amid the challenges posed by higher rates, we continue to witness incremental increases in lock volume. Market expectations indicate a 50% chance for a rate cut in June. However, robust economic data in the coming months may delay rate cuts until July or September, potentially resulting in sideways or even lower production.”
Housing market potential
CoreLogic chief economist Selma Hepp believes the housing market will see improvements despite higher mortgage rates.
Read more: “I feel like I’m pushing the boulder up the hill”
Hepp said lower rates would “help the housing market tremendously,” but increased inventory of existing homes should lead to more sales than last year, even as overall market imbalances persist. She predicted a “competitive spring home-buying season and sustained home price gains.”
“In markets with new construction, new builds are the way to go as homebuilders continue to offer incentives to motivated buyers to help defray the current high-interest rate environment,” Hepp said.
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