The 30-year fixed rate is now at its highest level since July
Mortgage professionals and borrowers alike breathed a sigh of relief over the summer as rates started to fall – but some of that optimism has been tempered by a swift rebound in recent weeks.
The 30-year fixed mortgage rate rose last week to its highest level since July, according to the Mortgage Brokers Association, hitting 6.73% and weighing down on a brief jump in applications.
The association expects that rate to slip to 6.3% before the end of 2024, although the recent uptick has poured cold water on faint hopes of a surge in homebuying in the final months of the year.
It’s also served as a reality check for those brokers and originators who might have been preparing to take their foot off the gas, according to an industry executive who’s urging mortgage professionals to maintain the same grind and drive that’s gotten them through recent lean years.
Corrina Carter (pictured top), president and chief executive officer of CMS Mortgage Solutions, told Mortgage Professional America that it was becoming increasingly clear the “new normal” means mortgage rates significantly above the rock-bottom lows of 2020, 2021 and early 2022.
That means complacency simply isn’t an option. “I feel like probably by the first quarter of next year, everybody’s going to realize we’re not going to really see much more of a change,” she said. “I think that then is when we actually say, ‘OK – this is our life. This is who we are, and this is how we have to get business.’”
Temporarily lower rates gave false sense of security
Ultra-low rates might be positive for borrowers and a potential spike in volume, but they’re also an anomaly that doesn’t come around too often, and that shouldn’t be taken as reflective of a normal market. “I’m kind of glad rates didn’t stay low all the way through the first month of [2025] and it was more of a dip,” Carter said, “because I feel like it gave us a sense of false appreciation for where we are.”
Mortgage applications remained stable last week, with a slight 0.1% decline as mortgage rates rose for the fourth time in five weeks, reaching 6.73%. https://t.co/9H1XYaZn3n
— Mortgage Professional America Magazine (@MPAMagazineUS) October 31, 2024
The environment that’s prevailed over the past two years – one that’s required brokers and LOs to knuckle down and find new ways to eke out business – has been helpful in a way, according to Carter, because it’s served as a reminder that nothing comes easy in the mortgage industry.
The recent uptick in rates has also reinforced the importance of staying focused and productive in the role. “If you were taking your foot off the gas a little bit and you’re resting and coasting even a hair too long, the market said, ‘We’re not doing that. You’ve got to keep going.’”
Is it time to accept mortgage rates for what they are?
Those holding out hope for a market boom in the coming years are almost certainly mistaken, with little sign of another homebuying wave to rival that of the COVID-19 pandemic. What’s more, the so-called “lock-in effect” that’s keeping scores of Americans in their home because of the low rates they secured during that era could also weigh down on market growth.
That’s not to say the overall outlook isn’t brighter. Rates may not plummet next year, but they’re still likely to drop further – and with borrowers seemingly accustomed to the new realities of the market, more could be willing to step off the sidelines than is currently the case.
Still, caution is the name of the game moving into the new year – particularly with the current inventory shortage presenting some hurdles for hopeful homebuyers as they prepare to make a move.
Against that backdrop, lower mortgage rates won’t automatically improve affordability significantly, Carter said, because borrowers are still likely to face limited choice. “The key is, can we find them the house in the area that they want because of the shortage of inventory? Do I feel like interest rates are going to loosen that up a ton? I don’t necessarily think so,” she said.
Still, the outlook appears strong for first-time homebuyers. With almost all of her company’s business coming on the purchase side, Carter said that cohort is making up a sizable percentage of buying activity. “I feel like people are starting to save up a little bit more than what they were, being in a position to buy,” she said. “I think the decision is coming a little easier for some.”
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