Mortgage Rates Jump To 7.2%, Highest Since November 2022

Mortgage Rates Jump To 7.2%, Highest Since November 2022...

U.S. mortgage rates surged to 7.2% this week, hitting their highest level in over three years and squeezing homebuyers already struggling with record-high prices. The sharp increase, reported by Freddie Mac on Thursday, comes as stubborn inflation delays expected Federal Reserve rate cuts.

The 30-year fixed-rate mortgage climbed 0.3 percentage points from last week's 6.9%, marking the fourth consecutive weekly increase. Rates haven't been this high since November 2022, when they peaked at 7.08% during the Fed's aggressive inflation-fighting campaign.

"This is a gut punch for spring homebuyers," said Lawrence Yun, chief economist at the National Association of Realtors. The rate jump adds about $200 to the monthly payment on a typical $400,000 loan compared to rates in January.

Home sales have slowed noticeably in recent weeks, with mortgage applications dropping 10% last week according to the Mortgage Bankers Association. The sudden rate spike follows stronger-than-expected March jobs data and consumer price reports that suggest inflation remains sticky.

"The market is realizing the Fed may not cut rates until September or later," said Danielle Hale, Realtor.com's chief economist. Many buyers who locked in rates below 3% during the pandemic are now effectively priced out of moving, creating what economists call the "golden handcuff" effect.

Builders report increasing use of rate buydowns to attract buyers, with 60% offering incentives compared to just 30% last fall. The average discount now equals about 1.5 percentage points off the market rate for the first year of a mortgage.

Financial markets now see just two Fed rate cuts likely in 2024, down from expectations of six cuts in January. The next key indicator comes Wednesday with the Consumer Price Index report for March, which could either reinforce or ease current rate pressures.