Mortgage Rates Surging The Highest They've Ever Been In 2023

Dayana Sabatin

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In response to lingering inflation and a strong job market, mortgage rates in the US experienced a significant jump this week. According to data released by Freddie Mac on Thursday, the 30-year fixed-rate mortgage averaged 6.81% for the week ending July 6, up from 6.71% the previous week. This marks a notable increase compared to the 5.30% rate recorded a year ago.

Sam Khater, the chief economist at Freddie Mac, noted that the upward trajectory of mortgage rates persists due to a resilient economy, persistent inflation, and a more hawkish stance from the Federal Reserve. The combination of these factors, along with limited housing inventory, continues to price out many potential homebuyers from the market.

The average mortgage rate is derived from mortgage applications received by Freddie Mac from numerous lenders nationwide. The survey includes borrowers who made a 20% down payment and possess excellent credit.

The rate increase aligns with the trend observed in the yield on 10-year Treasuries, which reacts to economic indicators suggesting that stubborn inflation could remain elevated. Recent data, including the Personal Consumption Expenditures price index, a critical gauge monitored by the Federal Reserve, indicates that inflation is not receding as rapidly as anticipated.

Jiayi Xu, an economist at Realtor.com, highlighted that while the headline PCE decreased from 4.3% in April to 3.8% in May, the core PCE, which excludes volatile food and energy prices, only saw a slight decline on a year-over-year basis. In May, it dropped from 4.7% to 4.6%. The newly released minutes from the Federal Reserve reaffirmed officials' commitment to bringing inflation back to the target range of 2%.

Although these factors may exert near-term upward pressure on interest rates, including mortgage rates, Xu predicts a gradual decrease that could bring rates close to 6% by the end of the year.

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