Mortgage rates rose sharply last week, a new challenge for beleaguered house hunters and potential refinancing candidates.
The average rate on a 30-year fixed-rate loan jumped to 6.32% for the week through Wednesday, according to Freddie Mac, up from 6.12% a week earlier. It’s the biggest week-over-week increase since April.
Average 15-year loans rose to 5.41% from 5.25%.
Traders have been adjusting their expectations around the size and pace of future Federal Reserve interest rate cuts after strong job creation in September. Bond yields, which mortgage rates closely follow, rose as markets began to price in higher odds of a smaller 25 basis-point cut to the benchmark federal funds rate in November.
Inflation data released on Thursday strengthened the case for a small cut. Prices increased slightly more than expected in September, though annual inflation of 2.4% cooled to the lowest level in more than three years.
Now that the market is aligned on the direction of Fed rate cuts, Treasury yields and mortgage rates should stabilize until more inflation data is released at the end of the month, Ralph McLaughlin, senior economist at Realtor.com, said in a statement.
But rates stabilizing at a higher level means some pain for buyers, sellers, and refinancers alike. Zillow estimates that mortgage rates rising to 6.6% – where Mortgage News Daily has been seeing rates in recent days – moves about 275,000 of last year’s homebuyers out of the window to save money by refinancing.
About 160,000 homeowners still stand to reap refinancing savings because their mortgage rates are over 7.6%, Zillow calculated. Those homeowners could shave an average of $391 per month off their mortgage payments.
Compared to a year ago, mortgage rates have still dropped more than a percentage point.
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.