Mortgage rates back at 7% ahead of Fed meeting

By Aarthi Swaminathan

Hotter-than-expected economic data pushing rates up, industry group says

The numbers: Mortgage rates are back at 7% on the back of stronger-than-expected economic data on inflation.

Ahead of a Federal Reserve meeting on Wednesday, the 30-year inched up towards 7% in the latest week, lowering demand for home-buying and refinancing.

The overall market-composite index - a measure of mortgage application volume - fell in the last week, according to the Mortgage Bankers Association (MBA) said on Wednesday.

The market index fell 1.6% to 198.2 for the week ending March 15 from a week ago. A year ago, the index stood at 221.

Key details: The purchase index - which measures mortgage applications for the purchase of a home - fell 1.2% from a week ago.

The refinance index fell 2.5%.

The average contract rate for the 30-year mortgage for homes sold for $766,550 or less was 6.97% for the week ending March 15. That's up from 6.84% from the week before.

The rate for jumbo loans, or the 30-year mortgage for homes sold for over $766,550, was 7.14%, up from 7.04% the previous week.

The average rate for a 30-year mortgage backed by the Federal Housing Administration was 6.89%, up from 6.77% a week ago.

The 15-year rose to 6.49% from 6.37% from the previous week.

The rate for adjustable-rate mortgages was down to 6.33%, from 6.38% last week.

The big picture: Home buyers are getting used to 7% mortgage rates for the time being, as the economy continues to indicate that interest rates are still running hot and a big drop seems far off at this point.

But higher rates also discourage homeowners from selling their homes, since the gap between their rock-bottom mortgage rates and the current levels remains high, prolonging the lock-in effect.

Nonetheless, rates are expected to fall over the course of this year, albeit less sharply, which will be a boost to affordability. Fannie Mae now expects the 30-year mortgage rate to finish the year at 6.4% in a March report, versus the 5.9% it had initially predicted.

What the MBA said: "Mortgage applications continued to show sensitivity to rate movements, and both purchase and refinance activity decreased over the week," Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association, said in a statement.

And "with housing supply low and prices high, the average loan size for purchase applications increased to the highest level since May 2022," he added.

-Aarthi Swaminathan

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03-20-24 0700ET

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