After dropping to the lowest level in two years, average rates on a 30-year fixed-rate mortgage have surged back up to nearly 7%.
According to data from Mortgage News Daily, 30-year mortgage rates averaged 6.91% as of October 24 -- the highest since August. A week earlier, the average was 6.68%. A month ago, it was 6.18%.
Rates have now jumped by 71 basis points since the start of October alone. It might be surprising, considering mortgage rates dropped to the lowest level since September 2021 when the Fed cut interest rates last month. But that failed to thaw the frozen housing market.
Mortgage applications have decreased to the lowest level since July, as both purchase and refinance applications saw declines over the past four weeks, according to the Mortgage Bankers Association. The number of existing-home sales also fell 1.0% in September.
"Home sales have been essentially stuck at around a four-million-unit pace for the past 12 months, but factors usually associated with higher home sales are developing," National Association of Realtors' Chief Economist Lawrence Yun said in a statement. "There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy. Perhaps, some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election."
The continued strength in the economy, including robust monthly job growth and solid consumer demand, is also part of the driving force behind rising mortgage rates.
"Over the last few years, there has been a tension between downbeat economic narrative and incoming economic data stronger than that narrative," Sam Khater, Freddie Mac's chief economist, said in a statement. "This has led to higher-than-normal volatility in mortgage rates, despite a strengthening economy."
It appears prospective buyers might also be waiting on rates to come even lower. According to Bankrate's Mortgage Rates Survey, 47% of homeowners say they would need rates under 5% to feel comfortable buying a home this year. Meantime, the survey found just 2% of homeowners are comfortable purchasing a home at a rate of 6% or higher.
"The hopes for lower interest rates need the reality check that 'lower' doesn't mean we're going back to 3% mortgage rates," Greg McBride, CFA, Bankrate's chief financial analyst, said in a statement. "Mortgage rates are 7% now and the best we may be able to hope for over the next year is 5.5 to 6%."
Still, with the Fed making anticipated cuts through the end of 2024 and into 2025, mortgage rates could continue to bounce around.
"In the words of Jerome Powell, the Fed is 'recalibrating' interest rates. Markets are recalibrating too, to reflect the fact that interest rates won't come down as quickly as had been previously expected," McBride noted.