Mortgage Rates Hit Highest Level Since May 2024 Amid Economic Strength
The US housing market is experiencing a significant shift as mortgage rates soar to their highest point in nearly a year. According to Freddie Mac, the average 30-year mortgage rate has jumped to 7.04%, up from 6.93% just a week ago. This marks the fifth consecutive week of rising mortgage rates.
Strong Employment Data Drives Rate Hike
The latest jobs report, which showed the US added 256,000 jobs in December, has played a significant role in this rate hike. The strong hiring data has led traders to reassess their expectations for Federal Reserve rate cuts this year, resulting in a sharp increase in bond yields. As Sam Khater, Freddie Mac’s chief economist, noted, “The underlying strength of the economy is contributing to this increase in rates.”
Treasury Yields Drop, Offering Hope for Prospective Homebuyers
However, there may be some relief on the horizon for prospective homebuyers. Treasury yields have dropped sharply after a key inflation metric eased for the first time since July. As of midday Thursday, the 10-year Treasury yielded 4.61%, down from as high as 4.79% on Tuesday. This decline could potentially lead to lower mortgage rates in the coming days.
Federal Reserve Rate Cuts and Mortgage Rates
Mortgage rates are heavily influenced by expectations about the path of benchmark interest rates set by the Fed. Currently, traders see even odds that the Fed will cut interest rates by May, up from a roughly 30% chance earlier this week. According to Danielle Hale, chief economist at Realtor.com, “There are more wild cards than normal this year,” citing the new Congress and unknowns around President-elect Donald Trump’s return to office as factors weighing on rates. Hale remains optimistic, stating, “I’m confident that some of the uncertainty will settle down, and that will help mortgage rates settle a little bit.”
What This Means for Homebuyers
As mortgage rates continue to fluctuate, prospective homebuyers are left wondering what this means for their purchasing power. While the current rate hike may seem daunting, the potential for lower rates in the coming days offers a glimmer of hope. As the housing market continues to evolve, it’s essential for homebuyers to stay informed and adapt to the changing landscape.
Leave a Reply