Mortgage rates started the month rising to nearly 6.7%. Strong economic data and elevated inflation are the two main reasons mortgage rates have risen for the last 4 straight weeks. According to Freddie Mac, the average rate on a 30-year fixed mortgage increased to 6.65% from 6.50% the previous week.
Will these higher rates affect the spring buying season? Higher mortgage rates have a direct impact on borrowing costs, hurting affordability. At today’s rate, buyers need to put more than 20% down if they don’t want to be cost-burdened. However, data shows that the housing market will likely pick up in the coming months. Contract signings – an indicator for home sales - rose significantly for the second straight month. And, if inflation eases faster than expectations, mortgage rates could decrease to the low range of 6%. NAR forecasts home sales to increase by 5 percentage points in the second quarter of the year. Even with this increase, however, activity will remain lower than a year ago.