Rates Continue Climb Toward 5%

Mortgage rates rose to an average of 4.72%, up from last week’s 4.67%, Freddie Mac reported Thursday.

Freddie’s Primary Mortgage Market Survey (PMMS) found that the 30-year fixed-rate mortgage (FRM) averaged 4.72%. A year ago at this time, the 30-year FRM averaged 3.13%.

“Mortgage rates have increased 1.5 percentage points over the last three months alone, the fastest three-month rise since May of 1994,” said Sam Khater, Freddie Mac’s Chief Economist. 

“The increase in mortgage rates has softened purchase activity such that the monthly payment for those looking to buy a home has risen by at least 20 percent from a year ago.”

The daily fixed rate crossed 5% this week for the first time since 2011, save two days in 2018.

Solita Marcelli, GWM Chief Investment Officer Americas, UBS Financial Services, is warning her clients that the housing bubble could pop if rates exceed 5.75%.

Calling the last two years “mortgage mania,” her team estimates that 28% of median household income now goes toward monthly mortgage payments, nearing the 31% threshold for being housing cost-burdened.

However, because only about 1% have adjustable rate mortgages – compared to 40% in 2005 – she doesn’t see another 2008-style crash.

Additional findings from Thursday’s report:

  • 15-year fixed-rate mortgage averaged 3.91% with an average 0.8 point.
  • A year ago at this time, the 15-year FRM averaged 2.42%.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.56% with an average 0.3 point.
  • A year ago at this time, the 5-year ARM averaged 2.92%.