Rising mortgage rates are inflating mortgage payments, which are now roughly $110 under October’s all-time peak, Redfin reported.
With the 30-year fixed mortgage rate averaging 6.63% in the four weeks through January, the median monthly payment hit $2,607. That’s about $250 above December levels, and an 11.5% increase year-over-year.
It’s a side effect of changing outlooks on broader monetary policy. Whereas mortgage rates were sliding through the end of 2023 on the bet that the Federal Reserve would soon cut interest rates, investors have since changed their minds.
As mortgage rates loosely follow interest levels, renewed signals that interest rates will stay higher for longer are instead leading to a mortgage rate rebound.
The average daily mortgage rate already underwent its steepest rise in over a year on February 2, as a blowout jobs report convinced investors that the Fed would stay hawkish. The daily rate surged to 7.04% at the start of this week.
Redfin expects mortgage rates to remain elevated near current levels until the Fed cuts interest rates, which may be months away from happening.
“High mortgage rates brought the local market to a near-standstill from August through November, activity picked up when rates dropped a bit in mid-December, and now it’s slowing down again as rates rise,” Redfin agent Luis Rojas said in the report.
Alongside mortgage payments, home prices have also risen through January, with the median US sales price jumping an annual 5.4%, its biggest increase in over a year.
These increases are pushing homebuyers out of the market, and pending sales slumped 8%. Harsh weather hasn’t helped, as winter conditions delayed dealmaking.
“I’m advising buyers — especially first-timers — that the mortgage rates they see in the news aren’t the be-all and end-all. Some local lenders are willing to give rates in the 5% range for new construction projects because any business is better than no business,” Rojas added.
Although Fannie Mae’s January survey of mortgage optimism hit a high not seen since March 2022, only 17% of homebuyers consider it a good time to buy a home right now.
