Mortgage Rates Could Top 7% This Spring as Inflation Ticks Up

Published by | March 12, 2024

Homebuyers might not want to bet on mortgage rates making any big drops as the spring housing market kicks off.

Inflation ticked up in February by 3.2% year over year, according to the most recent consumer price index summary. That’s the third month in a row that inflation has crept higher, moving further away from the U.S. Federal Reserve’s 2% target. This means the Fed is likely to keep interest rates higher for longer as it strives to bring inflation down while simultaneously achieving a “soft landing” for the nation’s economy.

However, higher rates are bad news for the housing market. While mortgage rates are separate from the Fed’s rates, they have generally been moving in the same direction.

“It means another uptick in mortgage rates,” says® Chief Economist Danielle Hale. “Mortgage rates are likely to top 7% again for a brief period.”

Mortgage rates averaged 6.88% for 30-year fixed-rate loans in the week ending March 6, according to Freddie Mac.

Those high rates plus high home prices and a shortage of homes for sale have made the housing market a difficult place for many buyers to navigate. That’s been particularly true of many first-time homebuyers, who have been struggling with a lack of affordability.

Mortgage rates tumbled in December after the Fed indicated that rate cuts were on the horizon. They then settled into the mid-6% range before heading up again after new data showed the economy was stronger than the Fed would like as it strives to bring inflation back down.

Hale anticipates the Fed won’t cut rates until September due to the latest inflation data. That is likely to keep mortgage rates higher for longer.

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