The rate for the average 30-year fixed mortgage loan soared past 7% this week, marking an end to the recent declines.
The average 30-year fixed mortgage rate climbed to 7.03% in the week ending May 30, marking a 0.09% increase from last week's rate of 7.03% and a 0.24% gain from 6.94% in the same period last year.
The average 15-year mortgage rate also climbed this week to 6.36%. It was 0.12% lower last week and 0.18% lower in the same period in 2023. Until this week, rates have been on a decline since mid-April. That is according to Freddie Mac's Primary Mortgage Market Survey.
Sam Khater, Freddie Mac's chief economist, noted that mortgage rates began rising after Federal Reserve officials last week said they would only cut benchmark rates if inflation slows further. They also signaled possible rate hikes if inflation data continues to disappoint.
"Following several weeks of decline, mortgage rates changed course this week. More hawkish commentary about inflation and tepid demand for longer-dated Treasury auctions caused market yields to rise across the board. This reality, as well as economic signals that have moved sideways over the last few weeks, have resulted in mortgage rates drifting higher as markets continue to dial back expectations of interest rate cuts," Khater said in the report.
The elevated mortgage rates have led to a dip in buying and refinancing activity, with purchase applications declining by 1% from a week ago while refinancing activity dropped by 14%, according to the Mortgage Bankers Association.
Mortgage Forecasts in 2024
In a report published this month, government-sponsored mortgage finance giant Fannie Mae estimated that the 30-year mortgage rate would likely remain elevated through 2024, hovering above 7% throughout 2024 before easing slightly at the end of the year.
Freddie Mac, another government-backed financial enterprise, predicted that mortgage rates would remain somewhere in the 7% range through the end of the year, only falling in 2025.
Similar forecasts were also made by Lawrence Yun, chief economist of the National Association of Realtors; Matt Vernon, head of retail lending at the Bank of America; and Yelena Malevyev, senior economist at KPMG Economics.
