The 30-year fixed-rate mortgage (FRM) averaged 6.50% this week, up from 6.32% last week, a third-straight week of upticks, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac released Thursday.
Latest numbers:
- 30-year fixed-rate mortgage averaged 6.50% as of February 23, 2023, up from last week when it averaged 6.32%. A year ago at this time, the 30-year FRM averaged 3.89%.
- 15-year fixed-rate mortgage averaged 5.76%, up from last week when it averaged 5.51%. A year ago at this time, the 15-year FRM averaged 3.14%.
What the experts are saying:
“The economy continues to show strength, and interest rates are repricing to account for the stronger than expected growth, tight labor market and the threat of sticky inflation,” said Sam Khater, Freddie Mac’s chief economist. “Our research shows that rate dispersion increases as mortgage rates trend up. This means homebuyers can potentially save $600 to $1,200 annually by taking the time to shop among lenders to find a better rate.”
Realtor.com economist, Jiayi Xu commented:
“The Freddie Mac fixed rate for a 30-year loan continued to rise to 6.5%, the highest level of 2023. On an ordinary day, strong retail sales data and a 53-year low unemployment rate would be a cause for celebration among investors and businesses. However, under current conditions, these robust data raise uncertainties in the markets. On one hand, the hotter-than-expected inflation might force the Fed to reopen doors to faster interest rate growth, which is unwelcome news for both investors and businesses. On the other hand, some policymakers did not interpret January’s data as signs of accelerating growth, choosing to wait for more information before deciding. As a result, they are in favor of implementing smaller rate hikes in the coming months, which would be welcomed by markets.
“While it is hard to predict at this point whether the Fed is going to make an aggressive move next month, many companies continue to tighten their belts in preparation for a potential economic downturn. Although the tech industry appears to be most vulnerable to the Fed’s rate hikes, other sectors, especially the service industry, could be impacted as well. If panic about potential job cuts spreads, not only might those who are laid off from the tech sector pull back their spending on leisure and entertainment, but workers in non-tech industries may also cut back their budgets due to fears about job security. This could potentially endanger jobs in thriving service sectors such as leisure and hospitality, which are currently driving the employment growth.
“This means that the housing market will continue to be a ‘nobody’s market”–not friendly to buyers nor to sellers. Mortgage rates are likely to move in the 6%–7% range over the next few weeks, which continues to pose a significant challenge to affordability. As a result, January data shows existing-home sales across the U.S. have retreated for the 12th straight month, though at a slower pace. In addition, the West is the only region where home prices decreased year-over-year, suggesting reduced demand for housing. This decline may be due to a combination of multiple factors such as high housing prices, high mortgage rates, and the recent wave of tech layoffs on the West Coast. Furthermore, with more companies announcing their return-to-office mandates last week, some remote workers may choose to relocate back to major cities or tech hubs. As home prices are still high and mortgage rates are up compared to one year ago, people who move back may prefer to stay in the rental market, driving up the already high rental demand in these areas.”
