On October 9, 2024, the average interest rate for a 30-year fixed-rate mortgage in the United States increased to 6.36%, marking the largest weekly rise in over a year. This spike followed better-than-expected economic data that led financial markets to reassess their expectations for further interest rate cuts by the Federal Reserve.
The Mortgage Bankers Association reported a 22 basis point increase in mortgage rates for the week ending October 4, the most significant rise since July 2023, when the Fed was actively raising rates to combat inflation.
The Federal Reserve had initiated cuts to its short-term benchmark rate last month, reflecting a belief that inflation is trending towards its 2% target. This came after a notable reduction of half a percentage point, aimed at stabilizing a cooling labor market.
Previously, mortgage rates had peaked near 8% in October 2023 but had dropped by more than 1.75 percentage points in anticipation of the Fed's policy easing. The recent increase in rates brings borrowing costs back to levels seen in late August.
The 30-year mortgage rate is closely linked to the yield on the 10-year Treasury note, which rose sharply following a government report indicating a significant job growth in September and a decrease in the unemployment rate. This positive labor market data has led traders to adjust their expectations, now forecasting fewer and smaller rate cuts by the Fed in the coming months.
Current market predictions suggest that the Fed may lower its policy rate from the current range of 4.75%-5.00% to between 3.50%-3.75% by mid-2025.
Source: Reuters, Date: 2024-10-09