America’s most popular home loan rate rose again this week, dealing another blow to homebuyers facing the highest borrowing costs in 20 years.
Medium 30-year fixed mortgage rate – now flirting with the 7% mark – double what it was at the start of the year.
While growth in home prices continues to slow, sharply higher financing costs are pushing buyers away — or out of the market altogether.
“The numbers don’t work for them anymore” he says Lisa Sturtevant, economist with Bright MLS in the mid-Atlantic region.
“That 7% line is also a mental barrier for buyers, even those who still qualify,” he says. “Maybe they’re waiting to see if interest rates go down.”
If it’s still too much can be a buyer stopped looking, others found some sort of solution to higher rates.
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30 year fixed rate mortgage
Mortgage giant Freddie Mac’s average 30-year mortgage rate rose to 6.92% this week from 6.66% a week ago. reported on Thursday. At this time last year, the average rate was 3.05%.
The 30-year rate has not been this high since April 2002.
“We continue to see a tale of two economies in the data: Strong jobs and wage growth are keeping consumer balance sheets positive, while persistent inflation, recession fears and housing affordability are sharply dampening housing demand,” said Sam Khater, Freddie Mac’s chief economist.
“The next few months will certainly be important for the economy and the housing market.”
15 year fixed rate mortgage
Freddie Mac says the typical 15-year mortgage rate was 6.09% this week, up from 5.90% last week.
A year ago at this time, the 15-year rate averaged 2.30%.
Buyers today face a different reality than just a few months ago, when many were forced to bid well above asking price and forego the windfall to get a home.
By making rats into men less suitable, sales plummeted. August sales fell for the seventh straight month and were down 20% from a year earlier, according to the latest data from the National Association of Realtors.
5 year adjustable rate mortgage
The five-year adjustable-rate mortgage (ARM) rate averaged 5.81% this week, up from 5.36% last week.
At this time last year, five-year ARMs averaged 2.55%.
ARMs begin with a period of fixed interest rates—typically between three and 10 years. Interest rates are typically lower than on a fixed-rate loan, such as the more popular 30-year mortgage.
But after the initial term is over, the rate on an ARM is adjusted down or up based on a criteria such as basic degree.
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The case for higher mortgage rates
The Federal Reserve has raised its benchmark interest rate five times this year slow down the economybut consumer prices are still rising at an alarming rate.
That means more rate hikes are coming — and mortgage rates are affected by changes in the Fed’s interest rates, even if they don’t directly correspond to them.
At the last meeting of the Fed, officials said that the only way to fight inflation is to stay on an aggressive course of restrictive monetary policy.
“Many participants emphasized that the cost of doing too little to reduce inflation is likely to outweigh the cost of doing too much.” minute from the meeting.
A lower cost alternative
Some buyers are trying to avoid today’s high borrowing costs by keeping their mortgage rates for a shorter period of time.
“Adjustable-rate mortgages are growing in popularity because many borrowers believe they will be able to refinance to a fixed-rate mortgage at some point before their ARMs qualify,” says Washington real estate agent Corey Burr. DC area.
Borrowers considering this route should look at adjustable-rate loans with terms of seven or 10 years, he said.
“It will increase the chances of getting a refinancing opportunity,” Burr said.
Mortgage applications this week
Mortgage activity fell again amid rising interest rates, according to the bank’s weekly survey Mortgage Bankers Association.
Applications for refinancing and purchases decreased by 2% compared to the previous week.
Refis decreased by 86% compared to last year, and purchase loan applications decreased by 39%.
Mike Fratantoni, chief economist at MBA, said the share of ARM applications also remained “quite high” at 11.7%.
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This article provides information only and should not be construed as advice. Provided without any warranty.
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