Average mortgage rate rises to 6.5%, highest level since November
An open house in Levittown in November. Credit: Debbie Egan-Chin
The average 30-year fixed mortgage rate reached its highest level since mid-November at 6.5% for the week ending Thursday, according to mortgage giant Freddie Mac.
The average increased from 6.32% last week. It was the third consecutive week that rates have moved higher after they appeared to be heading lower to start the year. A year ago, the average was 3.89%.
Data released earlier this month that showed evidence of strength in the U.S. economy has sent rates higher.
“The economy continues to show strength, and interest rates are repricing to account for the stronger than expected growth, tight labor market and the threat of sticky inflation,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Freddie Mac recently published research that showed the wide range of rates offered to borrowers. It noted that when rates were highest last year, in October and November, borrowers who sought two rate quotes could have saved as much as $600 a year. Borrowers seeking out four offers would have seen a range of as much as $1,200.
Mortgage rates tend to move in the same direction as the 10-year U.S. Treasury yield, which was the highest since November earlier this week. Yields rise when prices on government bonds fall. That generally happens when investors are confident they will find greater investment returns elsewhere.
“The bond market indicates that mortgage rates will continue to hurt housing affordability,” wrote Nadia Evangelou, a senior economist at the National Association of Realtors, in a commentary published earlier this week. “While investors expected the Federal Reserve to slow down on rate hikes, recent economic data suggests that there may be additional hikes this year.”
A return to rising mortgage rates will increase costs for Long Island homebuyers, who are already facing a market with an inadequate number of houses.
A combination of high mortgage rates and low inventory resulted in the fewest closed home sales in January since May 2020, which was during the first phase of the COVID-19 pandemic in New York. Still, prices have budged little thus far.
The median price among closed sales in Nassau County last month was $660,000, or 1.5% higher than the same month a year ago. The Suffolk median rose by 2.9% to $535,000.
Competition for homes continues even as mortgage rates have increased by more than 2.5 percentage points in the past year, said Brett Van Nostrand, vice president and branch manager at Norcom Mortgage in Melville.
“The pool of buyers, even at the higher rates, it’s still there,” he said. “It’s amazing.”
Van Nostrand said he sees the lack of homes for sale as the greater hindrance than mortgage rates. One obstacle to homeowners moving is the hesitance to give up a lower mortgage rate. He is hopeful that more houses will become available for buyers in the coming months.
“We’re optimistic that if supply can reach the demand, we’ll have a spring market,” he said. “The question in the next couple weeks: Will people be listing like they normally do?”
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.
