Interest Rate Increase Puts Home Buyers and Refinancing Applicants Under Pressure

Last week, mortgage rates recorded a significant increase, posing a new challenge particularly for homebuyers and those who had hoped for more favorable refinancing conditions. According to Freddie Mac, the average interest rate for a fixed 30-year loan rose to 6.32%, up from 6.12% the previous week—the strongest weekly increase since April. Rates for 15-year loans also increased noticeably from 5.25% to 5.41%. Dealers adjusted their expectations regarding future interest rate cuts by the Federal Reserve after the robust September employment figures. The associated bond yields, which mortgage rates traditionally closely follow, rose as the markets increasingly anticipated a smaller rate cut of 25 basis points in the key interest rate in November. This trend was reinforced by recent inflation data showing a slight price increase in September, although the annual inflation fell to 2.4%, the lowest level in over three years. Ralph McLaughlin, chief economist at Realtor.com, expressed the expectation that bond yields and mortgage rates will stabilize until new inflation data is published at the end of the month. Nevertheless, stabilized rates at a higher level could burden both buyers and sellers, as well as those interested in refinancing. According to estimates from Zillow, an increase in mortgage rates to 6.6% could result in about 275,000 buyers from the past year losing the opportunity to save money through refinancing. Overall, about 160,000 homeowners could still benefit from savings if their rates are above 7.6%, saving an average of $391 monthly. Compared to the previous year, mortgage rates have still fallen by more than one percentage point; however, the question remains: Is it currently a good time to buy a house?