Mortgage rates increased again last week due to a heap of political and financial news.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.57%, up from 6.39% the week prior.
A year ago at this time, the 30-year FRM averaged 5.10%.
The 15-year fixed-rate mortgage rose from 5.75% to 5.97%. A year ago, it averaged 4.31%.
Daily average rates even exceeded 7% on May 25, hitting their highest level since November.
“The U.S. economy is showing continued resilience which, combined with debt ceiling concerns, led to higher mortgage rates this week,” said Sam Khater, Freddie Mac’s Chief Economist.
At the current rate, 6.57%, Redfin reported that the typical buyer’s monthly mortgage payment amounts to $2,614, a record high.
Rates are surging as officials hint at a likely resolution to the debt ceiling debate. Investors have reacted strongly to that news, resulting in rates drifting back up after a few stagnant weeks.
“That may seem counterintuitive, but optimism is driving rates up because an economic crisis would lead to the Fed lowering rates as they try to prevent a recession. Financial markets felt the risk of default was unusually high for the last month or so, which caused rates to stay lower than they otherwise would have been. Now that Democrats and Republicans have come to the negotiating table and are making some progress toward a deal, rates are going up,” Redfin Economics Research Lead Chen Zhao explained.
Khater added that the ongoing inventory shortage is contributing to affordability concerns, as many homeowners don’t want to sell and lose their historically low interest rate.
“If this predicament continues to limit supply, it could open up an opportunity for builders to help address the country’s housing shortage,” he said.
Many builders are handing out freebies to attract buyers, usually concessions equal to about 3% of the sale price. This takes some of the sting out of closing costs and other expenses.
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