U.S. mortgage rates rose for a fourth consecutive week, climbing as housing demand waned. Despite recent expectations of relief from anticipated Federal Reserve rate cuts, borrowing costs have continued to rise.
Freddie Mac reported that the average rate of a 30-year fixed mortgage hit 6.54% by Oct. 24, 2024, a peak unseen since August. Although still below this year’s high of 7.22% from May, the upward trend has started to weigh on homebuyers.
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The anticipated rate cut by the Fed brought mortgage rates to a low of 6.08% in September, yet this temporary dip failed to ignite the housing market. Sales of previously owned homes, which dominate the market, slipped 1% in September from the prior month, bringing the annual adjusted rate down to 3.84 million homes sold, the lowest since 2010, according to the National Association of Realtors (NAR).
Mortgage applications also declined, with a separate report from the Mortgage Bankers Association showing a four-week dip, reaching a level not seen since July.
Experts suggest that the rate dip might have come too late in the season for most buyers, who typically enter the market in spring when families can more easily plan around the school year. Some buyers may also hold out, hoping that rates might drop even further since the Fed has signaled plans to continue adjusting rates through 2025.
For buyers, each small uptick in rates raises monthly payments, adding to the burden of high home prices, which in September rose for the 15th straight month, according to NAR data. Increased home insurance costs are also stretching family budgets.
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Analysts attribute the recent rise in mortgage rates to strong economic data rather than Fed policy. While mortgage rates are linked to the 10-year Treasury yield, which many expected to fall with anticipated Fed rate cuts, stronger-than-expected economic performance has driven yields up.
For instance, September job growth exceeded forecasts, and recent retail spending reports indicate steady consumer demand, bolstering investor expectations and nudging bond yields upward.
