Weekly mortgage rates rise for sixth week in a row

You can illustrate the dictionary definition of “bummer” with a graph of recent mortgage rates.

The 30-year fixed-rate mortgage has been rising for six weeks in a row. Rates averaged 6.75% for the week ending Oct. 31, according to rates provided to NerdWallet by Zillow. That’s up 15 basis points from the previous week and up 86 basis points from six weeks ago. A basis point is one hundredth of a percentage point.

As a sustainable economy moves up mortgage ratesThe economy performs a frustrating balancing act, with encouraging news ultimately discouraging people from buying houses or refinancing their mortgages.

“Despite easing inflation, surprisingly strong economic data has kept Treasury yields and the mortgage rates that accompany them higher,” said Orfe Divungi, senior economist at Zillow. “We saw strong earnings growth in the data, which supports consumer spending.”

Increased consumer spending, in turn, could slow progress in reducing inflation rate. This is why a strong economy makes it more expensive to borrow money to buy a home.

This week’s news on inflation is mixed. Federal ReserveRussia’s favorite measure of inflation, the PCE price index, showed an overall decline in the annual inflation rate to 2.1% in September from 2.3% in August.

But the core PCE price index, which does not take into account volatile food and energy prices, remained at 2.7% for the third month in a row. The Fed’s goal is to lower its benchmark PCE price index to 2%.

The central bank has made progress on inflation for a time, with core PCE price inflation falling from 3.7% in September 2023 to 2.6% in June. But as inflation surged and then stopped, it’s no coincidence that mortgage rates jumped higher in October.

Homeowners recoiled from refinancing at these higher interest rates, but home buyers are still applying for loans, according to the Mortgage Bankers Association. This is despite a significant decline in purchasing power in just one month.

Consider a buyer who can afford to pay $2,000 a month in principal and interest. In the last week of September, this buyer could afford to borrow $327,900 at that week’s average interest rate of 6.16%.