Home mortgage rates increased for the second week in a row, bringing little holiday cheer to a slow-moving housing market.
The average for a 30-year, fixed-rate home loan rose to 6.85% during the week that ended on Christmas Day, mortgage company Freddie Mac said on Thursday. That’s up 0.13% from one week earlier; the rate had inched up by about the same amount the previous week, reversing three weeks of gradual rate declines. The rate was 6.61% during the same period in 2023.
Freddie Mac also reported that the rate for a 15-year fixed-rate mortgage climbed to 6% over the past week, up from 5.92% a week earlier and 5.93% during the holiday week a year ago.
“While a slight improvement in new and existing home sales is encouraging, the market remains plagued by an overwhelming undersupply of homes,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Khater’s agency estimated in late November that the U.S. housing shortage was 3.7 million homes, not much improved from the 3.8 million it previously calculated in May 2021. The U.S. Census said Monday that monthly sales of new single-family homes increased 6% in November, while the National Association of Realtors reported a 4.8% rise in sales of existing single-family homes during the same month.
The daily 30-year mortgage rate stood at 7.16% on Thursday, up very slightly from before the Christmas holiday, according to Mortgage News Daily. With this rate, someone taking out a $250,000 mortgage that afternoon would likely have a monthly payment of around $1,690.
Rate reports at this time of year should be taken with a grain of salt, Matthew Graham, chief operating officer of Mortgage News Daily, said in a post on Monday. He noted that fewer of the people who buy and sell bonds are working, and that buying and selling activity is the primary driver of mortgage rates. Fewer trades can lead to “some distortion” in rates, he said.
Recent unemployment and inflation data, as well as statements by the Federal Reserve suggesting it will be cautious about future interest rate cuts, could also be factors in mortgage rates’ upward creep.
The U.S. government reported on Dec. 6 that the economy added 227,000 jobs and the unemployment rate was virtually unchanged from the previous month at 4.2%. Five days later, the government said that inflation was up slightly. The week before Christmas, the Federal Reserve lowered its key interest rate but said it would take a more careful approach in 2025 to focus on job growth and lower prices.
The upward trend in mortgage rates resulted in a 0.7% decline in applications for home loans in the week that ended Dec. 13, according to Mortgage Bankers Association. The group will release newer application data on Jan. 2.
“Mortgage rates increased last week, leading to overall mortgage application activity decreasing for the first time in five weeks," Joel Kan, MBA’s vice president and deputy chief economist, said in a Dec. 18 statement. “Buyers remained active in the purchase market, helped by gradually improving inventory conditions and a more positive outlook on the economy and job market.”