Home buyers saw borrowing costs rise again last week. (iStock)
After weeks of declines, mortgage rates reversed course this week, rising back above 7%, according to Freddie Mac.
According to Freddie Mac’s latest report, the average 30-year fixed-rate mortgage for the week ending May 30 was 7.03%. Primary mortgage market researchThat’s up from an average of 6.94% last week and up from 6.79% a year ago.
The average interest rate on a 15-year mortgage is 6.36%, up from 6.24% last week and 6.18% last year.
The rise in borrowing costs comes as interest rate cuts move further away. The Federal Reserve has reiterated its commitment to keeping inflation closer to its 2% target. At its May meeting, the central bank said it would keep the federal funds rate in the 5.25% to 5.5% range, the same range it has held since July.
Fed Chairman Jerome Powell said it will probably take longer for the central bank to be confident that inflation is falling toward its target level.
Inflation data this year has exceeded the Fed’s expectations. Personal Consumption Expenditures (PCE) Price IndexPrice growth excluding food and energy prices, a key measure the Fed tracks to gauge inflation, rose to 3.6% after rising to 2% in the fourth quarter, raising concerns that inflation may be heading in the wrong direction and could trigger further rate hikes.
“More hawkish rhetoric on inflation and weak demand for longer-term Treasury auctions have pushed market yields higher across the board,” said Sam Carter, chief economist at Freddie Mac. “This reality, along with flat economic data in recent weeks, has led the market to continue to dial back interest rate cut expectations, pushing mortgage rates higher.”
If you are considering buying a home, it is a good idea to compare different lenders to find the best mortgage interest rate. Visit Credible to compare different lender options and choose the one with the best interest rate.
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Spring home sales slump
High borrowing costs for homebuyers continued to hinder home buying, leading to a decline in home sales in April. The number of home purchase agreements was down 7.7% from the previous month and 7.4% from a year ago.
“Pending home sales tend to lead existing home sales by about a month or two and are a good indicator of market conditions,” said Hannah Jones, senior economic research analyst at Realtor.com. “Mortgage rates hovered around 6.8% in March, which helped boost the number of contract signings. However, mortgage rates rose to 7.2% from 6.8% in April, discouraging buyers.”
In April,ew home sales and Existing Home Sales Refusal tooJones said home prices fell 4.7% month-on-month and 1.9% month-on-month, signaling a slowdown in homebuying activity amid rising home prices. With home prices continuing to rise and mortgage rates remaining high, homebuying ability is not expected to improve much and shows little sign of slowing this year.
“We’re witnessing a significant shift in homebuying sentiment,” said Thelma Hepp, chief economist at CoreLogic. “This time last year, potential homebuyers were eager to jump on the purchase bandwagon despite high interest rates and few homes for sale. With little prospect of interest rates falling in the near term, there’s now a wait-and-see mentality.”
“Households are focusing on news headlines and perceiving rising insurance costs and disruptions from climate change as making homebuying more difficult, which is also having a negative impact on sentiment,” Hepp continued.
Homebuyers can find the best mortgage rate by weighing up different options. They can visit online marketplaces like Credible to compare interest rates and choose loan terms.
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Home prices rise in March
Home prices hit a new high in March, up 6.5% from a year ago and matching last year’s rate of increase. Mid-FebruaryAccording to the latest S&P CoreLogic Case-Shiller National Home Price Index: reportSan Diego recorded the highest growth rate in March, increasing 11.1% year over year. New York and Cleveland came in second, with growth of 9.2% and 8.8%, respectively.
The annual rise in home prices comes as homebuyers are struggling to afford homes due to high mortgage rates and a shortage of homes. But housing inventory is improving. April saw a 30.4% increaseBut it’s still about 36% lower than pre-pandemic levels.
“The homebuying decision comes down to a paycheck-versus-paycheck calculation that is influenced by income, mortgage rates and home prices,” said Odeta Kusi, deputy chief economist at First American. “Home prices continue to reach new highs, but the pace of price appreciation has slowed as supply increases at a time of declining demand and is likely to continue to slow as long as this supply-demand dynamic persists.”
If you’re thinking about buying a home, Credible can help you find the best mortgage rate for your financial situation, and you can get pre-qualified within minutes.
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