Average 30-year mortgage rate jumps to 6.32%, hurting homebuyers

Aspiring homebuyers on Long Island hoping mortgage rates would drop below 6% this fall will have longer to wait, as mortgage rates jumped higher this week.

The average 30-year fixed rate rose to 6.32% for the week ending Thursday, according to mortgage giant Freddie Mac, which publishes weekly data. A week ago, the average was 6.12%. 

This week's increase in the 30-year fixed average was the largest since April. Last year at this time the average rate was even higher at 7.57%.

Mortgage rates had fallen steadily since July and were close to breaking lower than 6% two weeks ago. But last week's report that U.S. employers added 254,000 jobs in September, beating economists' expectations, pushed rates higher. 

The last time the average was below 6% was in September 2022.

"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," Sam Khater, Freddie Mac's chief economist, said 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."

Long-term mortgage rates tend to move in the same direction as the 10-year Treasury yield, which rose to its highest level in two months this week. The yield often rises during periods of strong economic growth and falls when there is greater fear of a recession. 

As a result, the strong jobs report coincided with higher mortgage rates. 

"That's good news for the economy on the surface but bad news for mortgage rates," said Larry Matarasso, a senior loan officer at mortgage broker Green River Capital in Plainview.

A slower pace of inflation could lead to lower mortgage rates. The Consumer Price Index, a measure of inflation, rose 2.4% in September from a year earlier, which was the slowest annual increase in prices since February 2021, the Bureau of Labor Statistics reported Thursday. Still, inflation is above the Federal Reserve's long-term goal to keep inflation at 2% annually. 

The increase in rates is a setback for Long Island homebuyers who have been facing a shortage of listings, leading to competition for homes and record prices. 

The median price of a single-family home on Long Island in August was a record $835,000 in Nassau County and $680,000 in Suffolk County, according to the latest report from OneKey MLS.

"Home buyers, especially first-time buyers, are extremely sensitive to mortgage rates, and the increase in rates helps to explain the retreat in mortgage applications," Jessica Lautz, deputy chief economist at the National Association of Realtors, wrote Thursday in commentary published online.

Consumers should remember that the Freddie Mac report represents a national average and borrowers will see different rates, depending on their own financial situation and their lender or broker, Matarasso said. 

Overall, he's concerned the increase in rates during the past few weeks will dissuade buyers. 

"That has hurt the fall housing market here on Long Island. It's very nice during the fall, and I fear that it's going to hurt all the momentum that we've started to build up in the mortgage business and in real estate, and that's what I'm concerned about," Matarasso said. "We were on a nice run. Rates were starting to come down. People were feeling better about buying and then rates jumped."

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.