Mortgage rates are once again nearing 7%
Transcript:
Conway Gittens: It was a choppy session on Wall Street Wednesday as investors gear up for Friday’s monthly jobs report. Meanwhile, Albertson’s beat quarterly earnings forecasts. In a sign of confidence after an abandoned merger with Kroger, the supermarket chain raised its outlook for 2025.
Looking ahead, The stock market is closed Thursday and the bond market will have a shortened session to mark the passing of President Jimmy Carter.
Turning now to other headlines, 2025 is not off to a good start for prospective homebuyers. Mortgage rates have risen four weeks in a row, hitting highs not seen since July. The average rate on a traditional 30-year fixed-rate mortgage came in at 6.99 percent last week, according to the Mortgage Bankers Association. With mortgage rates backing up to roughly 7 percent, some homeowners are getting scared away.
Higher mortgage rates have been sticky despite the Federal Reserve cutting interest rates by a full percentage point in 2024. So why the disconnect? Mortgage rates are currently being driven by what the market thinks the Fed will do, rather than what the Fed has already done.
While the next Fed move is still likely to be a cut, how many cuts is up for debate. According to minutes from the Fed’s December meeting, “participants indicated that the Committee was at or near the point at which it would be appropriate to slow the pace of policy easing.” With pockets of inflation heating up again, the job market stronger than thought, and uncertainties around Trump’s future tax and tariff policies, investors now expect interest rates to stay higher for longer. And that likely means the same for mortgage rates.
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