Home Loan Rates Move Higher

Aerial view of homes in suburban neighborhood

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Key Takeaways

  • Persistent increases in mortgage rates over recent weeks have dampened hopes from early 2023 that housing affordability would improve.
  • Earlier expectations for lower inflation and easing monetary policy have not materialized, and mortgage rates have reached their highest level since early November.
  • The recent upward move in rates makes it more difficult for those looking to purchase a home.

Mortgage rates rose for the fourth week in a row, reducing optimism from earlier this year that housing affordability was improving.

Freddie Mac said that the average rate on a 30-year, fixed-rate conforming home loan (up to $726,200) was 6.65%, up from 6.5% last week and the highest it's been since early November.

Freddie Mac Chief Economist Sam Khater pointed out that entering 2023, borrowing costs decreased with expectations of slower economic growth, lower inflation, and easing of Fed monetary policy. However, those haven't happened, and mortgage rates "boomeranged."

More Difficult to Buy

Khater explained that the lower rates in January brought buyers back into the market. Now, the move upward is making it more difficult for those looking to purchase a home to do so. He added that this is particularly the case for repeat buyers who currently are paying half the current rate on their existing loan.

George Ratiu, senior economist at Realtor.com, said the increase in mortgage costs is “deepening the affordability challenge as we enter the crucial spring homebuying season.” He noted that at today’s rate, buyers of a median-priced home will have a $2,132 monthly payment, a 49% jump from last year.

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  1. Twitter. "George Ratiu: Tweet From March 2, 2023."

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