Mortgage rates increased for the second week in a row following January's inflation numbers, according to Freddie Mac.
The average rate for a 30-year fixed-rate mortgage rose to 6.32% for the week ending Feb. 16, according to Freddie Mac's Primary Mortgage Market Survey. This was an increase from the previous week when it averaged 6.12% but the rate remained significantly higher than last year when it was 3.92%.
The average rate for a 15-year mortgage was 5.51% this week, up from 5.25% the week before and up from 3.15% last year.
The increase comes after inflation slowed less than expected in January, with consumer prices mainly buoyed by an increase in shelter costs. Shelter costs have risen by nearly 8% over the past year, according to the latest report from the Bureau of Labor Statistics (BLS).
"Mortgage rates moved up for the second consecutive week," Freddie Mac Chief Economist Sam Khater said in a statement. "The economy is showing signs of resilience, mainly due to consumer spending, and rates are increasing.
"Overall housing costs are also increasing and therefore impacting inflation, which continues to persist," Khater continued.
If you are looking to take advantage of lower mortgage rates by refinancing your mortgage loan, or are ready to shop for the best rate on a loan, consider visiting an online mortgage broker like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.
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Mortgage rates are likely to fluctuate in the 6% to 7% range over the next few weeks, according to Realtor.com. At the same time, home prices have dropped 11% over the past seven months.
The combination of lower rates and home prices has been enough to lure some homebuyers back.
However, the latest increase in rates and the expectation that inflation will take longer than anticipated to get to the Federal Reserve's 2% target was met by muted homebuyer demand.
Mortgage applications dipped 7.7% last week, compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. Refinancing loan demand dropped 13% and was 76% lower than the same week one year ago.
"Applications to refinance and buy a home declined on both a weekly and annual basis, as an uptick in mortgage rates curbed activity," MBA President and CEO Bob Broeksmit said. "Economic uncertainty, affordability challenges, and inventory constraints are keeping some would-be buyers on the sidelines."
If you are ready to shop for a mortgage loan or are looking to refinance an existing one, you can use the Credible marketplace to compare rates and lenders and get a mortgage preapproval letter in minutes.
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Shelter costs accounted for nearly half of the monthly all items increase in January, according to the BLS. However, the data reflects what conditions were like for housing 12 months ago, much more so than today's housing market.
"The housing market has clearly retrenched in response to surging prices and higher mortgage rates in the past year, but that is not yet apparent in the shelter cost component of the index," Jim Baird, Plante Moran Financial Advisors chief investment officer, said in a statement. "That should provide a source of relief as the year progresses, but has not appeared yet."
Zillow economists noted that slowing rent growth would also impact inflation, possibly slowing the growth in the coming months.
If you are ready to shop for a mortgage loan you could get a better rate by looking at several lenders. Visit Credible to help you compare interest rates from multiple mortgage lenders and choose the one with the best rate for you.
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