It’s no surprise to active homebuyers and sellers that mortgage rates are continuing to climb. And the result of the rise is, frankly, mixed.
According to a recent Freddie Mac weekly survey, “Homebuyers continue to show resilience even though rising mortgage rates are causing monthly payments to increase by about one-third as compared to a year ago. Several factors are contributing to this dynamic, including the large wave of first-time homebuyers looking to realize the dream of homeownership.”
Freddie Mac also noted that “In the months ahead, we expect monetary policy and inflation to discourage many consumers, weakening purchase demand and decelerating home price growth.”
The average 30-year fixed-rate mortgage inched up from last week to 5.30% according to Freddie Mac’s weekly survey, more than 200 basis points from the same time last year when the rate was 2.94%.
As the California Association of Realtors (CRA) also pointed out recently, “With rates remaining high for the rest of the year as the Fed continues its aggressive approach to battle inflation, homebuyers’ purchasing power will likely be squeezed further as the cost of borrowing increases. With rates likely to remain elevated in the short term, we expect the ongoing monetary policy to weaken consumer demand, slow down economic activity, and cool off home price growth in the second half of the year.
Depending on who you talk to, however, mortgage applications are either holding firm or are decreasing.
According to the CRA, mortgage applications are holding up despite rate hikes, and prospective buyers are showing some resiliency to higher rates as mortgage applications increased for the second consecutive week despite interest rates rising to their highest level since 2009, according to Mortgage Bankers Association.
But, said MBA’s Associate Vice President of Economic and Industry Forecasting Joel Kan, “Ongoing concerns about rapid inflation and tighter US monetary policy continued to push Treasury yields higher, driving mortgage rates to their highest level in over a decade. Rates increased across the board for all loan types, with the 30-year fixed-rate hitting 5.2%, the highest level since 2010,”
“The 30-year rate has increased 70 basis points over the past month and is 2 full percentage points higher than a year ago,” he continued. “The recent surge in mortgage rates has shut most borrowers out of rate/term refinances, causing the refinance index to fall for the sixth consecutive week. In a housing market facing affordability challenges and low inventory, higher rates are causing a pullback or delay in home purchase demand as well.”
Kan also pointed out that “home purchase activity has been volatile in recent weeks and has yet to see the typical pick up for this time of the year.”
