Mortgage rates surged for the second straight week after hitting two-year lows

(CNN) — Prospective homebuyers waiting on the sidelines for a further drop in mortgage rates received unwelcome news on Thursday.

The average rate on a standard, 30-year fixed mortgage was 6.32% in the week ending October 10, mortgage financing provider Freddie Mac said Thursday. It was the largest one-week increase in mortgage rates since April and the second straight week rates jumped higher after falling to a two-year low last month.

Mortgage rates had been steadily trending downward since the spring. The Federal Reserve’s rate cut last month ignited hopes that mortgage rates would continue their downward trend. But a stronger-than-expected job report last week caused bond yields to jump. Mortgage rates track the benchmark 10-year Treasury yield.

“We should remember that the rise in rates is largely due to shifts in expectations and not the underlying economy, which has been strong for most of the year,” said Sam Khater, Freddie Mac’s chief economist, in a statement. “Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market.”

Last month, the Fed delivered its first rate cut since the start of the Covid-19 pandemic in 2020 and signaled more cuts are on the way. Soon after, the average rate on a 30-year fixed mortgage fell to its lowest since September 2022 at 6.08%.

The recent bounce in mortgage rates underscores the uneven path toward greater home affordability. Many US markets have been plagued by a shortage of homes, increasing competition and driving home prices to near-record highs.

Though mortgage rates remain above any level seen between 2008 and 2022, the average 30-year fixed rate is significantly below a two-decade peak of 7.79% reached last fall.

A separate report Wednesday from the Mortgage Bankers Association showed that the recent bounce in mortgage rates has tamped down housing demand. Mortgage applications fell by 5.1% for the week ending October 4, according to the report. The data showed a drop in both refinance and purchase applications.

Mortgage rates could resume their downward course if coming economic reports are downbeat — as this would suggest the Fed will cut rates further. Economists at Wells Fargo estimate that the average 30-year fixed mortgage rate will fall to 5.5% by the end of 2025.

“From week to week, we should expect mortgage rates to bump around this fall,” said Bright MLS chief economist Lisa Sturtevant. “Nothing is guaranteed in this unusual economy. Continued stronger-than-expected job growth or a turnaround in inflation could lead to a shift in the mortgage rate trajectory.”

This story has been updated with additional context and developments.

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