Borrowing costs may see temporary increases in the coming weeks but are expected to stabilize.
Mortgage rates jumped this week, driven up by a record number of jobs and higher-than-expected inflation, says Nadia Evangelou, senior economist and director of real estate research for the National Association of REALTORS®. The 30-year fixed-rate mortgage averaged 6.32%, up from 6.12% last week, according to Freddie Mac.
While mortgage rates may see temporary increases in the coming weeks, they’re largely predicted to stabilize and remain below their most recent peak of 7.08%, which was set in mid-November 2022. “Mortgage rates could linger at around 6.5% for a few more months before heading below 6% by summer—and maybe even 5.5% by the end of the year,” says NAR Chief Economist Lawrence Yun.
Once mortgage rates dip further, expect more home buyers to return to the housing market, Yun predicts. But he warns that with inventory levels still stubbornly low, an influx of buyers looking to take advantage of falling rates could set off “another revival of multiple bidding.”
Housing makes up one of the largest components of the Consumer Price Index and accounts for about 40% of the inflation index. Inflation is staying elevated because of rising rents, Yun says. In January, renters paid 8.6% more in rent than a year earlier. “That was a big contributor to the overall consumer price inflation running at 6.4% and well above the comfort level of 2%,” Yun says. “But rent relief is on the way.”
Yun notes that apartment construction is at a 40-year high. “As these new empty units steadily reach the market, rent growth will tame,” he says. “That will also pull back the overall consumer price inflation.” The CPI likely will ease in the second quarter of this year, Evangelou notes.
Freddie Mac reports the following national averages with mortgage rates for the week ending Feb. 16:
- 30-year fixed-rate mortgages: averaged 6.32%, increasing from last week’s 6.12% average. A year ago, 30-year rates averaged 3.92%.
- 15-year fixed-rate mortgages: averaged 5.51%, up from last week’s 5.25% average. A year ago at this time, 15-year rates averaged 3.15%.
Click HERE to read more.