Mortgage rates are rising again as inflation pressures from global conflicts spill into U.S. markets, squeezing homebuyers and clouding the outlook for relief. On Fox Business’ Varney & Co., M2 Communities CEO Mitch Roschelle warned that higher borrowing costs are eroding affordability and forcing many to delay purchases while they wait for clearer signs from the Federal Reserve.
M2 Communities CEO Mitch Roschelle breaks down rising mortgage rates as war-driven inflation hits affordability and raises questions about when relief may come on “Varney & Co.”
The warning comes as 30-year fixed rates hover well above levels seen during the pandemic boom. According to Freddie Mac’s weekly survey, the average mortgage rate has spent much of 2023 and 2024 near or above 7 percent, the highest sustained period in over two decades. With home prices still elevated and supply tight, the monthly payment for a typical buyer has surged.
Why Borrowing Costs Keep Rising
Inflation has proved stubborn, and the Federal Reserve has kept rates high to tame it. Geopolitical shocks have added pressure. Energy prices jumped following Russia’s invasion of Ukraine, and new risks in the Middle East have kept markets on edge. Those forces feed into shipping, fuel, and materials costs, which show up in broader inflation data.
When inflation stays hot, investors demand higher yields on long-term bonds. Mortgage rates tend to track those yields. The result is a housing market caught between a strong job market and the math of monthly payments that no longer work for many families.
Economists say this cycle looks different from past run-ups. Lending standards are tighter than in the mid-2000s. Household balance sheets are stronger. But higher rates are still doing their job by slowing demand in interest-sensitive areas like housing.
Affordability Squeeze Hits Buyers
The National Association of Realtors’ affordability index has hovered near historic lows, reflecting a sharp rise in payments relative to income. Many buyers face a tradeoff: move farther out, buy smaller, or keep renting. First-time buyers are hit hardest because they do not have equity from a prior home.
Homeowners with 3 percent mortgages are reluctant to sell and lose those deals. That keeps inventory thin and supports prices even as demand cools. The Mortgage Bankers Association has reported weak purchase applications compared with pre-pandemic norms, a sign that buyers are stepping back.
- Rates above 7 percent have become common since 2023.
- Home prices remain high due to tight supply.
- Monthly payments have climbed faster than incomes.
Sellers are offering more concessions, including rate buydowns and closing cost help. Builders are leaning on incentives and smaller floor plans to meet budgets. Yet many buyers still face a simple hurdle: even modest homes now carry payments that strain household finances.
When Could Relief Arrive?
The timing depends on inflation and the Fed. If price growth cools faster, the Fed could cut its policy rate, easing pressure on long-term yields and mortgages. If inflation stays sticky, rates may remain higher for longer. Markets have swung back and forth on expectations throughout 2024.
Some analysts see gradual easing late this year or in 2025 if wage growth slows and goods prices continue to stabilize. Others warn that supply shocks tied to war and shipping routes could keep costs elevated. A tight labor market also risks keeping services prices firm.
Roschelle’s remarks captured the uncertainty felt across the market. Buyers are watching every inflation report and Fed meeting. Lenders are preparing for waves of refinancing only if rates break meaningfully lower. Until then, small drops may not unlock enough savings to move the needle.
What Buyers and Sellers Can Do Now
Professionals advise keeping offers flexible and budgets conservative. Rate buydowns, adjustable-rate loans with clear reset terms, and larger down payments can help some buyers. Sellers who price to the market and offer credits may reach a wider pool.
For policymakers, the focus remains on supply. Zoning changes, faster permitting, and incentives for entry-level construction could ease pressure. But those fixes take time, and financing costs matter for builders, too.
Higher mortgage rates, fueled in part by war-driven inflation, have reshaped the housing market and delayed plans for many families. The next moves will hinge on inflation data and Fed signals. If price pressures ease, borrowing costs could drift lower and bring some relief. If not, households may face a longer stretch of tight budgets and hard choices. Watch for shifts in bond yields, monthly inflation reports, and builder incentives as early signs of where the market heads next.
