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Mortgage Rates Tick Up Ahead Of FOMC Meeting

Mortgage rates stabilized in the past week but remain close to the narrow range observed since the start of this month.

The 30-year fixed-rate mortgage averaged 6.69% as of Jan. 25, an increase from last week’s figure of 6.60%, according to Freddie Mac’s Primary Mortgage Market Survey released on Thursday. Meanwhile, the 15-year fixed rate averaged 5.96% this week, up from 5.76% during the prior week. And HousingWire’s Mortgage Rates Center showed that Optimal Blue’s average 30-year fixed rate for conventional loans was 6.713% on Thursday, up from 6.709% at the same time last week.

“Given this stabilization in rates, potential homebuyers with affordability concerns have jumped off the fence back into the market,” Freddie Mac chief economist Sam Khater said in a statement. “Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace.”

In the short term, all eyes are turned toward the meeting of the Federal Open Market Committee (FOMC) next Tuesday and Wednesday. According to economist Jiayi Xu, December’s higher-than-expected inflation reading made a dent in market confidence concerning the Federal Reserve’s readiness to implement interest rate cuts.

“The Federal Reserve is now facing a new challenge: determining the optimal timing for a shift to rate cuts,” Xu said in a statement. “The central bank faces the dilemma of potential negative impacts on the economy if the current restrictive policy persists longer and the risk of a dangerous rebound in inflation in 2024 if rates are cut prematurely.”

Mat Ishbia, chairman and CEO of United Wholesale Mortgage, told CNBC on Monday that he believed the Fed might start to cut rates as soon as March, April or May. 

Meanwhile, the Bright MLS forecast for 2024 calls for mortgage rates to decline further this year, reaching 6.2% by the fourth quarter. But inventory is likely to remain an issue for homebuyers this year, cautioned Lisa Sturtevant, chief economist at Bright MLS. To stay within budget, buyers will have to talk through trade-offs and compromises with a real estate professional who understands local market conditions, Sturtevant said in a statement.  

In January, builder confidence came in strong on the strength of declining mortgage rates. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) report rose seven points month-over-month to a reading of 44 in January.

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