30-year mortgage rate rises to the highest level in 2 months

• The 30-year fixed mortgage rate spiked to 6.87% in the last week, the highest level in two months.
• Elevated borrowing costs for prospective buyers sent mortgage applications lower.

Mortgage rates surged to a two-month high in the last week, sending mortgage applications tumbling.

The 30-year fixed mortgage rate jumped to 6.87% in the week ending February 9th, marking the highest level since early December 2023's average of 6.43%, according to Mortgage Bankers Association data released on Wednesday.

Meanwhile, elevated borrowing costs weighed on mortgage applications to push total volume down 2.3% from the previous week, with the share of refinancing activity dropping to 34.2% from the previous week's 35.4%.

"Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory," Joel Kan, MBA's Vice President and Deputy Chief Economist said.

The uptick in mortgage rates reversed the declines seen over the past few months. Rates falling from their highs of 8% last year to around 6.7% gave American homebuyers a $40,000 boost to their purchasing power.

The latest data on inflation also doesn't bode well for lower mortgage rates. While the fed funds rate isn't the only input for mortgage rates, longer timelines for rate cuts by the central bank are likely to keep home loan costs elevated.

Inflation in January clocked in at a higher-than-expected 3.1%, causing stocks to tumble and bond yields to spike on Tuesday. Shelter costs stood out as a big driver of the hot inflation print.

"Overall, this still falls in the category of speed bumps on a broader trajectory toward the Fed's inflation goals and intention to cut rates this year," Redfin said in a report following the inflation print.