Mortgage rate averages are inching higher as the U.S. economy remains strong and borrower expectations shift.
The 30-year, fixed-rate mortgage averaged 6.44 % as of Oct. 17. That’s higher than the previous week’s average of 6.32%, but it’s still lower than the same time a year earlier when it was 7.63%, Freddie Mac said Thursday. The increase marks the third consecutive week that the average has risen, and it’s put the 30-year, fixed-rate mortgage at its highest average since August.
The 15-year, fixed-rate mortgage also climbed, averaging 5.63%, according to the mortgage giant. Last week, it stood at 5.41%, and a year earlier it was 6.92%.
Daily mortgage rates, typically more volatile than the weekly averages, were also trending upward. As of Thursday afternoon, the 30-year, fixed-rate mortgage had inched upward compared to the previous day and was at 6.63%, Mortgage News Daily data showed. The 15-year, fixed-rate mortgage was 6.07%, unchanged from the previous day.
At those rates, if a buyer took out a 30-year, fixed-rate mortgage for a $250,000 loan, they’d be paying slightly more than $1,602 per month. But on Thursday, there were signals that mortgage rates could move higher by the end of the day.
The recent upward trend comes on the heels of several data reports indicating that the U.S. economy remains strong, even after the Federal Reserve lowered interest rates last month. Though that data has seemingly resulted in higher mortgage rates, it’s actually signaling support for housing, according to Freddie Mac Chief Economist Sam Khater.
“In general, higher rates reflect the strength in the economy that is supportive of the housing market,” he said in a statement. Last week, after mortgage rates saw their fastest weekly increase since April, Khater pointed to “shifts in expectations” rather than the economy as a cause for the upward rate trend.
Those “shifts” have already driven some prospective homebuyers out of the market. Mortgage application demand has plummeted in recent weeks as buyers have been deterred by higher rates, according to data from the Mortgage Bankers Association. And the volatility is expected to continue, according to Bob Broeksmit, the industry group’s CEO.
“Three consecutive weeks of increasing mortgage rates have slowed borrower demand for mortgages,” he said in a statement Thursday. “More rate volatility and application swings are likely in the coming weeks.”
But industry professionals are warning that it might be better to act now rather than waiting, and they’re urging borrowers to take a bigger picture approach.
“Compared to a year ago, rates are more than one percentage point lower,” Khater said. “Potential homebuyers can stand to benefit, especially by shopping around for the best quote as rates can vary widely between mortgage lenders.”