Mortgage rates inched up for the second straight week, with the 30-year fixed rate averaging 6.34% for the seven-day period ending Thursday, according to Freddie Mac’s weekly rate survey.
The 30-year rate averaged 6.3% last week following the year-to-date low of 6.26% seen during the week of Sept. 18.
The 15-year fixed rate reached 5.55% this week after averaging 5.49% last week and 5.41% two weeks ago.
Mortgage rates have climbed steadily since the Federal Reserve cut the benchmark federal funds rate by 25 basis points at its mid-September policy meeting. Though somewhat counterintuitive on its face, many experts had anticipated a rise in mortgage rates despite the Fed rate cut, believing the anticipated easing of borrowing costs had already been baked into longer-dated bond yields that impact lending rates.
The government shutdown likely won’t help prospective homebuyers seeking lower rates, according to Melissa Cohn, regional vice president of William Raveis Mortgage.
“Mortgage rates initially won’t be impacted by the shutdown,” Cohn observed in commentary provided to Scotsman Guide. “However, if it drags on, then investors will raise fears about the credit quality of U.S. debt, bond yields could go higher, and mortgage rates will increase.”
Sam Khater, Freddie Mac’s chief economist, noted in a press release that despite the recent rate uptick, the 30-year rate remains below its 52-week average of 6.71%.
“The last few months have brought lower rates, and as indicated by the recently reported increase in pending home sales, homebuyers are feeling more confident to get into the market,” Khater said.
On Monday, the National Association of Realtors reported August pending home sales increased 4% from July and 3.8% year over year.
But overall mortgage demand fell last week in response to the rise in interest rates.
The Mortgage Bankers Association (MBA) reported a 12.7% decline in mortgage applications for the week ending Sept. 26. Refinance activity decreased 21%, with the refinancing share of total applications falling to 55% from 60.2% the previous week.
“Mortgage applications decreased for the first time in three weeks, with both purchase and refinance activity posting declines,” MBA President and CEO Bob Broeksmit wrote in an analysis. “Although purchase applications continue to track above year-ago levels because of lower rates, economic uncertainty and affordability challenges continue to hold back home sales.”
