Mortgage rates surge higher, further hurting demand

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Mortgage rates jumped markedly this week, sending demand down for a second straight week.

Freddie Mac's latest Primary Mortgage Market Survey, released Thursday, showed that the average rate on the benchmark 30-year fixed mortgage surged to 6.32% from last week's reading of 6.12%. The average rate on a 30-year loan was 7.57% a year ago.

A «for sale» sign on a house in Philadelphia on Aug. 16. (Joe Lamberti/Bloomberg via Getty Images / Getty Images)

«Following the release of a stronger-than-expected September jobs report, the 30-year fixed rate mortgage saw the largest one-week increase since April,» said Sam Khater, Freddie Mac’s chief economist. 

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«However, 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,» Khater continued. «Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market.»

Housing market activity has been hindered by the ongoing affordability crisis from low inventory, high mortgage rates and soaring home prices. (Tammy Ljungblad/The Kansas City Star/Tribune News Service via Getty Images / Getty Images)

Many would-be buyers and sellers are holding out to see if rates fall further. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey.

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The average rate on the 15-year fixed mortgage