Mortgage rates held steadfast in the mid-six range with little indication that they would budge lower, according to Freddie Mac.
The average 30-year fixed-rate mortgage was 6.64% for the week ending Feb. 8, according to Freddie Mac's latest Primary Mortgage Market Survey. That's a slight increase from the previous week when it averaged 6.63%. A year ago, the 30-year fixed-rate mortgage averaged 6.12%.
The average rate for a 15-year mortgage was 5.90%, down from 5.94% last week and up from 5.25% last year.
There's little indication that rates will drop lower in time for the spring home buying season. The Federal Reserve is holding steady on interest rates while announcing last week that it would leave the federal funds rate at a 22-year high of 5.25% to 5.5%. Meanwhile, the January employment situation report showed a strong reading, and the economy grew again in the fourth quarter of 2023 to beat expectations.
"The economy and labor market remain strong with wage growth outpacing inflation, which is keeping consumer spending robust," Freddie Mac's Chief Economist Sam Khater said. "Meanwhile, affordability in the housing market is an ongoing issue due to continued high home prices, elevated mortgage rates and low supply of homes on the market, particularly for first-time and low-income homebuyers."
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Homebuyers trickle back as rates stagnate
Homebuyers, however, have been trickling back to the housing market to take advantage of more than a percentage-point drop in mortgage rates since late October.
Mortgage applications increased for the fourth time in five weeks, as demand for refinances and home purchases continues to slowly grow as rates remain below their peak from last fall, according to the Mortgage Bankers Association Weekly Mortgage Applications Survey.
Mortgage loan application volume increased 3.7% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index increased 8%. The refinance share of mortgage activity increased to 35.4% of total applications from 34.2% the previous week.
The good news is that rates have stabilized, but homebuyers looking for more affordability to return may have a longer wait.
"The U.S. economy continues to show signs of strength, so therefore, rates are likely to remain stable through the Spring homebuying season, with cuts not expected until the beginning of summer," CoreLogic Chief Economist Dr. Selma Hepp said. "However, in recent industry surveys, homebuyers are beginning to feel optimistic about where rates are heading, and more and more homebuyers are anticipating rates to decline through the year."
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Rate cuts coming this year
The Fed still envisions several interest rate cuts this year but has yet to set a timeline for how soon or far it will go. Fed officials have predicted at least three rate cuts this year, with interest rates expected to tick down to 4.6%, according to the central bank's updated economic forecasts in its Summary of Economic Projections (SEP).
Fannie Mae has based its forecast that mortgage rates will drop below 6% by the end of 2024 on the Fed moving faster than anticipated on interest rate reductions. How soon cuts will come depends on how fast inflation returns close to that 2% target rate or if the Fed senses that the U.S. economy is headed into a recession.
"In a recent interview on 60 Minutes, Fed Chair Jerome Powell gave a strong indication that they won't be cutting rates before the economy hits the target inflation of 2%," Percy CEO Charles Williams said in a statement. "With jobs numbers still very strong, it's not likely we'll see a rate cut until March, perhaps even May. And even then, it will be a slow and gradual pullback, so we'll be lucky to dip below 6% mortgage rates by the end of the year."
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