After shrinking slightly the week prior, mortgage rates shot back up last week to a 20-year high, Freddie Mac reported Thursday.
Freddie’s Primary Mortgage Market Survey found that the 30-year fixed-rate mortgage averaged 6.92%, up from 6.66%.
A year ago at this time, the 30-year FRM averaged 3.05%.
“Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April of 2002,” said Sam Khater, Freddie Mac’s Chief Economist.
“We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears, and housing affordability are driving housing demand down precipitously. The next several months will undoubtedly be important for the economy and the housing market.”
Daily rates exceeded 7% recently according to one metric, though averages have yet to cross that threshold. Still, rising rates are dampening demand and forcing some prospective buyers to the sidelines.
“What we’re experiencing now is like a hangover from this party in the housing market that was going on for the last two years,” Daryl Fairweather, chief economist at Redfin, told NPR.
“That party was fueled by cheap debt from the Federal Reserve, and now inflation is ending the party.”
Those who can afford higher rates are benefitting from the lack of competition, however.
First-time homebuyers now account for 45% of all buyers, up from 37% last year. As competition has cooled, they’re no longer competing against older buyers with cash or equity to strengthen their offers.
Their point of comparison for high or low monthly payments is also different from older buyers.
“The flow of homes into the market is slowing, suggesting homeowners are likely comparing their current low mortgage rate to today’s rates and deciding not to move. While rising mortgage rates are hurting affordability for all buyers, first-time buyers may be less deterred by higher rates because they’re comparing a monthly mortgage payment to what they’re paying in rent,” Zillow population scientist Manny Garcia said.
Additional findings from Thursday’s report:
- 15-year fixed-rate mortgage averaged 6.09% with an average 1.1 point.
- A year ago at this time, the 15-year FRM averaged 2.30%.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 5.81%, up from 5.36%, with an average 0.3 point.
- A year ago at this time, the 5-year ARM averaged 2.55%.
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