Mortgage Rates Rebound Back to 7%
By: Krystal Etienne · March 06, 2023 · Reading Time: 3 minutes
Mortgage Rate Bounce
Over the past year, the Fed’s rate-raising campaign has introduced volatility and uncertainty to the housing market. Both would-be homebuyers and homeowners alike have been buffeted by tenuous valuations and the fluctuating cost of carrying a mortgage.
After hitting a 20-year high of over 7% last October, mortgage rates had trended downward since mid-November, going hand-in-hand with data indicating inflation was moderating.
This prompted buyers to take action. Pending home sales jumped 8% in December. A housing recovery appeared possible, with important implications for the spring selling season. By mid-January, 30-year fixed mortgages near 6% could be secured.
Rates Back to 7%
Unfortunately, disappointing data on inflation has prompted a trend reversal.
Since February, mortgage rates have soared by 100-basis-points, bringing them back over 7%. Market observers fear that inflation is proving harder to tame than hoped for, in large part due to the strong labor market. Bond yields have been pushed higher and mortgage rates have followed suit.
Predictably, amid the unfriendly interest rate environment, mortgage applications fizzled in February.
As the cost of financing a home rises, many Americans are being squeezed out of the market. A 7% mortgage rate translates to a payment that is 50% higher than it was a year ago, when rates sat at just 4%.
Inflation’s effect of shrinking buying power, coupled with higher debt-servicing costs, have made owning a home unattainable for many. For such a purchase, patience is key. The right time to buy a home is different for everyone, but mortgage rates are a major factor, and with the Fed’s campaign apparently far from over, prospective buyers may need to be patient for some time.
Even so, history shows that expectations don’t always materialize. Surprising data over the past month drove the rates up – but future economic data could surprise on a positive note, which would naturally have the opposite effect. Should inflation moderate, so too may mortgage rates.
Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.