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Mortgage rates tick higher for first time in 9 weeks

Mortgage rates edged higher this week after several back-to-back declines while demand cooled, as data indicates would-be buyers are holding out for steeper drops.

Mortgage rates' steady downward trend hit a pause this week while demand fell, as data indicates would-be buyers are waiting on the sidelines until they see rates return to the levels of yesteryear.

Freddie Mac's latest Primary Mortgage Market Survey released Thursday showed that the average rate for the benchmark 30-year fixed mortgage nudged up to 6.62% this week, a slight increase from 6.61% last week. The popular note averaged 6.48% a year ago.

At the same time, the rate on the 15-year fixed mortgage edged lower, averaging 5.89% after coming in last week at 5.93%. One year ago, the rate on the 15-year fixed note averaged 5.73%.

"Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point. However, since then rates have moved sideways as the market digests incoming economic data," said Sam Khater, Freddie Mac’s chief economist. 

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"Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds," Khater continued. "While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise."

The Mortgage Bankers Association's (MBA) index of mortgage applications fell 9.4% for the week ended Dec. 29, compared with two weeks earlier, according to new data published Wednesday. 

Applications for a mortgage to purchase a home dropped 5% from two weeks earlier, while volume is down 12% compared with the same time last year.

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Demand for refinancing also fell last week, declining 18% from the previous two weeks, according to the survey. Compared with the same time last year, refinance applications are up about 15%.

Recent data released by a Realtor.com survey indicates many potential buyers and sellers alike are waiting for rates to show steeper declines before making a move.

A Realtor.com survey found 12% of prospective buyers say rates would need to drop below 6% to bring them into the market, while more than a quarter (28%) say rates need to fall below 4% before they would make an offer on a home.

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"The typical outstanding mortgage has a rate of less than 4%, more than 2.5 percentage points below today’s rate," said Hannah Jones, senior economic research analyst at Realtor.com. "This gap is likely to keep many sellers on the sidelines, waiting for mortgage rates to come down further."

FOX Business' Megan Henney contributed to this report.

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