Mortgage rates are rising again

Mortgage rates are once again trending upwards.

The 30-year-fixed rate jumping to 6.36% last week, from 6.14% a week earlier, according to data from the Mortgage Bankers Association released Wednesday. This slowed mortgage demand, leading to a 5.1% weekly decline in mortgage loan application volume.

“In the wake of stronger economic data last week, including the September jobs report, mortgage rates moved higher, with the 30-year fixed rate rising to 6.36 percent – the highest since August,” said Mike Fratantoni, Mortgage Bankers Association’s senior vice president and chief economist.

Hiring soared past estimates last month, with the U.S. economy creating 254,000 jobs. The unemployment rate also fell 0.1 percentage point from August to 4.1%.

The news soothed fears over an over-cooled economy, particularly on the employment side, and solidified economists’ predictions of a smaller, 25-basis-point interest rate cut at the Federal Open Market Committee’s next meeting.

Despite the Federal Reserve’s big interest rate cut last month, the housing market likely won’t see a boost anytime soon. For starters, affordability continues to be a challenge for most prospective buyers. The median sale price of a home in the U.S. in August was $432,849, according to Redfin (RDFN) data. That’s up 3% from a year ago and largely out of reach for typical Americans.

Many existing homeowners are also staying put — especially when it comes to the “lock-in” effect for mortgage holders who snagged rock-bottom rates in 2020 and 2021. That has also put pressure on housing supply.

“As we have highlighted before, the decision to buy a home is impacted by many factors, not just the level of mortgage rates,” Fratantoni said. “The largest constraint for many prospective homebuyers over the past year had been the lack of inventory.”

While overall loan volume and refinancing applications fell last week, the Mortgage Bankers Association’s purchase index — a measure of demand for mortgages used to buy a home — rose 0.1% from the previous week and was up 8% from last year. Fratantoni said that’s a sign that some buyers are still plowing forward, given that mortgage rates are still considerably lower from last year’s highs.

“Now, there are more homes available in many markets across the country, and with mortgage rates still low compared to recent history, at least some potential homebuyers are moving ahead,” he said.

Goldman Sachs (GS) warned last week that there is “limited room” for further major declines in the mortgage rate. The investment bank lowered its year-end 2024 and 2025 30-year conforming mortgage rate forecasts to 6.0% and 6.05%, respectively, from a prior forecast of 6.5% and 6.1%.

“We think the decline in mortgage rates has largely run its course,” Goldman economists said.