Mortgage rates rose for the fifth straight week and further exceeded 6% in the face of further aggressive rate hikes by the Federal Reserve.
According to Freddie Mac, the average rate on 30-year fixed-rate mortgages was 6.29% in the week ending Sept. 22, up from 6.02% the week before. This is significantly higher than last year’s 2.88% and the highest level since October 2008.
Mortgage interest rates have nearly doubled so far this year. After rising to nearly 6% in mid-June, fears of a recession made interest rates more volatile. But now all the attention is on the central bank’s campaign of rate hikes in its fight against inflation.
“The housing market continues to face headwinds, with mortgage rates rising again this week,” said Sam Cater, chief economist at Freddie Mac.
House prices began to soften as a result of rising interest rates, sales decreasedHowever, there is still a shortage of homes available for sale, and home prices continue to rise.
“The rapid rise in interest rates has certainly slowed the pace of sales, pushing homes into a booming boom just a few months ago,” said Marty Green, principal at Polanski Vitel Green, a law firm that represents mortgage companies. “It’s throwing cold water on the real estate market.” “In 2021 and he said ‘inventory’ was a big concern in early 2022, today the concern is ‘affordability’.”
Federal Reserve Chairman Jerome Powell announced on Wednesday 3 consecutive 75 basis point rate hikes.
The Federal Reserve does not directly set the interest rates borrowers pay on mortgages, but its actions affect them. . When investors see or anticipate a rate hike, they often sell government bonds, which drives up yields and increases mortgage rates.
This week’s hike has pushed 10-year Treasury yields up to 3.5%, the highest level in over a decade.
Rising interest rates put additional pressure on people trying to save to buy a home.
“Consumers can expect interest rates on variable rate mortgages, credit cards, auto loans and personal loans to rise in the coming weeks,” said Ratiu. “For the housing market, rising borrowing costs are the very remedy the Fed is prescribing to cool demand and bring down overheated prices.”
While this slowdown may not yet be reflected in inflation, “there is no doubt that the Federal Reserve’s aggressive rate hikes are cooling the residential real estate market.”
But prospective buyers still face the most affordable housing market in 35 years, given the combined effects of persistently high house prices, skyrocketing interest rates and slowing wage growth.
Freddie calculated that a buyer who paid a 20% down payment on a $390,000 home a year ago and financed the rest with a 30-year fixed-rate mortgage with an average interest rate of 2.88% would have made monthly mortgage payments of was $1,295. Mac.
Today, if a homeowner bought a similarly priced home at an average interest rate of 6.29%, they would be paying $1,929 a month in principal and interest. An additional $634 each month.
Powell said earlier this summer The housing market has been in a complicated situation where even higher mortgage rates could push home prices higher.
“I think if you’re a homebuyer or a young person looking to buy a home, you need to reset a little bit,” Powell said at a Fed meeting in June. We need to get back to where it gets lower and mortgage rates are lower again.”
At this week’s meeting, Powell said house prices were rising at an unsustainable rate. The “reset” should help bring prices closer to rents and other housing market fundamentals, he said.
“It’s good,” Powell said. “In the long run, demand and supply need to be better aligned so that home prices can rise reasonably and people can afford to buy homes again.”
Additional reporting by Nicole Goodkind.