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7% mortgage rates are back. But fear not, rates will fall in 2024,



Haunted by high prices and low inventory, the U.S. housing market can sometimes feel like a horror movie to prospective home buyers. Now there are fears that one villain is back from the dead: the 7% mortgage rate.

After mortgage rates surged in March 2022, when the Federal Reserve embarked on a series of interest rate hikes to quell inflation, the 30-year rate reached towards 8% in October 2023.

Mortgage rates began falling again last December, when they dipped below 7% for the first time in four months. Forecasters suggested the 7% rate was dead and gone, putting out predictions that rates would fall below 6% by the end of 2024, but the 7% rate may have some life in it yet. U.S economic growth is still running at a pace that’s hotter than expected, and that’s continuing to keep overall interest rates and mortgage rates up. 

But fear not: Rates will still fall in the back half of this year, economists tell MarketWatch.

Mortgage rates rose over the last week after data indicating consumer prices and wholesale prices rose last month, and the job market is thriving. With the Federal Reserve now expected to delay its interest rate cuts until the second half of the year, mortgage rates are once again rising across the board.

30-year is already past 7%, according to some sources

Mortgage lenders set their rates based on a number of factors, which include the borrower’s credit score, their loan-to-value ratio and other market factors. And that causes considerable variation: The 30-year mortgage rose to 7.14% as of Friday afternoon, according to one survey by Mortgage News Daily

Freddie Mac, which bases its estimates on thousands of mortgage applications, said its measure showed rates jumping 13 basis points to 6.77% as of Feb. 15. And the Mortgage Bankers Association, whose data comes with a one-week lag, indicated that the average contract rate for a 30-year mortgage was at 6.87% last week, with the 30-year jumbo loan already hitting 7%.

“What’s happened right at the moment is that there have been some strong data releases that people are eagerly relating to, including the CPI itself, and they’re concluding that the Fed is going to change the pace or timing at which they would cut interest rates,” Doug Duncan, chief economist at Fannie Mae, told MarketWatch in a phone interview on Friday.

“That’s an uncertainty in the market. But they’re also ignoring the fact that consumer spending came out very weak and a couple of other macro indicators came out weaker,” he added. Retail sales fell to a 10-month low in January, and credit-card and auto-loan delinquencies are at the highest point in more than a decade. Consumer credit growth has slowed significantly.

Intercontinental Exchange, which also tracks mortgage rates, noted that the 30-year rate was as high as 6.87% in the last few days. But “borrowers with lower credit scores, those taking cash-out refinances, and jumbo loan borrowers are all seeing offerings above 7%…



Read More: 7% mortgage rates are back. But fear not, rates will fall in 2024,

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