Mortgage rates rose again this week, stopping just below the 7% mark.
According to Freddie Mac, the average rate on 30-year fixed-rate mortgages was 6.94% for the week ending October 20, up from 6.92% the week before. A year ago, the 30-year fixed rate was 3.09%.
Mortgage rates have more than doubled since the beginning of the year as the US Federal Reserve (Fed) launched an unprecedented campaign to raise interest rates to curb skyrocketing inflation. A combination of central bank rate hikes, investor fears of a recession and mixed economic news have made mortgage rates increasingly volatile over the past few months.
“30-year fixed-rate mortgages continue to hover in the 7% range, hurting the housing market in the form of lower demand,” said Sam Cater, chief economist at Freddie Mac.
Home sales have been declining every month since February, in the longest home sales slump since October 2007 when the subprime mortgage collapse.
Rate hikes are taking a toll
The Fed’s aggressive interest rate hikes are hurting the housing market.
The Federal Reserve does not directly set the rate borrowers pay on mortgages, but its actions affect them. is in When investors see or anticipate rate hikes, yields move higher and mortgage rates move higher.
This week, 10-year US Treasury bonds hit their highest level since 2008. This indicates that mortgage rates could rise further.
Rising interest rates are scaring many home buyers. Mortgage applications are now down for the fourth month and to their lowest level in 25 years, according to Joel Kann, vice president and deputy chief economist at the Mortgage Bankers Association.
“The speed and level of interest rate increases this year have significantly reduced refinancing activity and exacerbated existing affordability challenges in the purchase market.” It is trending downwards in line with rising interest rates.”
According to MBA, home purchase applications fell 38% year-on-year and refinancing fell 86% year-on-year.
However, inflation remains high and interest rates could rise further.
Hannah Jones, Economic Data Analyst at Realtor.com said:
Affordability remains a challenge
Rising mortgage rates are making it even harder for prospective buyers to afford a home.
“Buyers, builders and sellers alike have taken a step back to consider the best course of action in light of rising mortgage rates and sustained inflation,” Jones said.
Homebuyer sentiment hit its lowest level since 2011, according to Fannie Mae, and homebuilder sentiment fell for the 10th straight month following a slowdown in construction activity this month, according to a report from the National Homebuilders Association. decreased. New listings have decreased compared to last year, as sellers have responded to market changes by refraining from listing activities.
A year ago, Freddie calculated, a buyer who paid a 20% down payment on a $390,000 home and financed the rest with a 30-year fixed-rate mortgage with an average interest rate of 3.09% would have a monthly mortgage payment of It was $1,331. Mac.
Today, if a homeowner bought a similarly priced home at an average interest rate of 6.94%, they would be paying $2,063 a month in principal and interest. $732 more each month.
According to Freddie Mac, the average mortgage interest rate is based on a survey of traditional homebuying loans to high-credit borrowers with a 20% down payment. However, many buyers with lower upfront payments or less than perfect credit will pay more.
“Price growth has slowed and prices have started to fall, but the fact that mortgage rates are high and continue to rise means that many of today’s buyers will not be able to afford to wait until home prices peak,” Jones said. “Buyers who are flexible can focus on affordable areas, take advantage of market conditions, and allow more time for homes to hit the market.” It’s going to be long, so you may be able to find a deal this fall by using your bargaining power.”
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