Mortgage rates have topped 7% for the fifth week in a row as Freddie Mac reports the 30-year fixed-rate mortgage (FRM) is averaging 7.18, up six basis points from last week’s average of 7 .12% corresponds. A year ago, at this time, the 30-year FRM averaged 6.02%.
“Mortgage rates edged up again this week and remain above 7%,” said Sam Khater, chief economist at Freddie Mac. “Renewed acceleration in inflation and the strength of the economy are keeping mortgage rates high. However, even during times of high mortgage interest rates, potential home buyers can benefit by shopping around for the best interest rate deal. Freddie Mac research suggests homebuyers can potentially save $600 to $1,200 per year by applying for mortgages from multiple lenders.”
Also this week, Freddie Mac reported that the 15-year FRM averaged 6.51%, down slightly from last week when it averaged 6.52%. A year ago, at this time, the 15-year FRM averaged 5.21%.
As mortgage rates rose at a faster pace, the Mortgage Bankers Association (MBA) reported that overall application volume fell 0.8% week-over-week to levels last seen nearly 30 years ago.
“High mortgage rates continue to dampen borrower demand, with mortgage applications in the first full week of September falling to lows last seen in 1996,” said Bob Broeksmit, president and CEO of MBA. “Ongoing pressure on affordability and housing inventory is keeping potential buyers away, and most homeowners have little incentive to refinance. MBA expects some of the recent interest rate volatility to ease enough to push the 30-year fixed rate closer to 6 percent by the end of the year.”
And as Jiayi Xu, economist at Realtor.com, points out, economic headwinds will continue to influence the mortgage rate landscape.
“Looking forward, we expect inflation to continue to move in the right direction as housing costs, the most important component of core CPI, rise year-over-year and at the Realtor.com median for five consecutive months “Rents indicate that rental prices have gradually fallen,” Xu noted. “Although the CPI Shelter Index has performed positively and lowered core inflation, the index tends to track prices with a lag, so the recent price recovery in for-sale property markets could create some uncertainty. Overall, we expect the Fed to maintain a wait-and-see approach at its next FOMC meeting and closely monitor future data.”
As the forces of affordability and low inventory continue to weigh on the country’s housing market, many are staying put, prioritizing renovation of their homes over a radical change of address given the persistently high interest rate market. A recent LendingTree survey of nearly 2,200 U.S. homeowners found that 68% of respondents have started or completed home improvement projects over the past 12 months, while 63% plan to begin in the next year.
“With many existing homeowners feeling and remaining mortgage-locked by today’s increased mortgage rates, homebuyers are seeing fewer homes actively listed for sale,” Xu added. “In fact, Realtor.com’s recent website visitor survey shows that the difficulty of finding a suitable home to purchase has become a more pressing concern for today’s homebuyers compared to the past. In particular, first-time home buyers face the difficult task of finding a property that meets their budget requirements, while repeat home buyers face the challenge of finding properties that meet their individual requirements. However, the best time to buy for the remainder of the year is approaching as further discounts and more new listings come onto the market, offering a glimmer of hope for both types of homebuyers in this challenging environment.”
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