Mortgage rates rise amid geopolitical tensions and uncertainty over future Fed cuts

By Aarthi Swaminathan

The 30-year rate is still more than 100 basis points lower than where it was a year go, Freddie Mac data shows

Mortgage rates inched up on concerns over geopolitical turmoil in the Middle East and the unclear path for future interest-rate cuts by the Federal Reserve.

The 30-year fixed-rate mortgage averaged 6.12% as of Oct. 3, according to data released by Freddie Mac on Thursday. That's up 4 basis points from the previous week. One basis point is equal to one hundredth of a percentage point.

Rates were still substantially lower than they were last year. A year ago, the 30-year rate was averaging 7.49%.

The average rate on a 15-year mortgage was 5.25%, up from 5.16% last week. The 15-year rate was at 6.78% a year ago.

Freddie Mac's weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage.

Separate data by Mortgage News Daily said that the 30-year fixed-rate mortgage was averaging 6.25% as of Thursday morning. The Mortgage Bankers Association's survey noted that the 30-year was at 6.14% as of Sept. 27.

The big picture: Mortgage rates are more than 100 basis points lower than they were a year ago, but home buyers are taking their time returning to the market, as evidenced by recent data on mortgage applications.

Part of the reason is that home prices remain high. The median price of a home sold as of Sept. 29 was $383,375, according to data from real-estate brokerage Redfin - up 4% from a year ago.

Repeat buyers could also be holding off on selling, which could require them to give up an ultralow mortgage rate in exchange for one that's as much as double their current rate.

What Freddie Mac said: "The decline in mortgage rates has stalled due to a mix of escalating geopolitical tensions and a rebound in short-term rates that indicate the market's enthusiasm on rate cuts was premature," Sam Khater, chief economist at Freddie Mac, said in a statement.

The bigger picture is that rates have declined substantially over the last year, home-price growth is slowing, housing inventory is rising and wages continue to rise, so "the backdrop for homebuyers this fall is improving," he said.

What are they saying? "There is still significant pent-up demand for homeownership in the market, though some buyers may be waiting for rates to come down further this fall," Lisa Sturtevant, chief economist at Bright MLS, said in a statement.

She added that she's closely watching employment data on Friday and inflation data next week to interpret how mortgage rates will trend over the coming months. If the U.S. economy shows signs of slowing, the Fed could move to cut interest rates more aggressively in the coming months, which would push mortgage rates down.

The bottom line for home buyers is that mortgage rates are expected to fluctuate for the time being, but the good news is that "homes are moving slow, inventory is rising, and price cuts are elevated," Realtor.com's Ralph McLaughlin said in a statement, "giving them a leg-up in the market they haven't had in years."

Realtor.com is operated by News Corp subsidiary Move Inc. MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.

-Aarthi Swaminathan

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10-03-24 1217ET

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