Mortgage rates soar to over 5% – what that means for homebuyers
Mortgage rates rose over 5% this week, marking the seventh consecutive week of hikes in mortgage rates new data by Freddie Mac.
The average 30-year fixed-rate mortgage rose to 5.11% APR in the week ended April 21, according to Freddie Mac’s Primary Mortgage Market Survey. This is an increase from last week’s 5% and last year’s 2.97%.
Other mortgage rates also rose this week. The 15-year mortgage rate has nearly doubled since last year, rising to 4.38%. That’s up from 4.17% last week and 2.29% last year. The five-year Treasury-indexed adjustable-rate (ARM) hybrid mortgage also rose to 3.75%, up from 3.69% last week and 2.83% last year.
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Competition for homebuyers is waning
Although rising interest rates and higher house prices make home ownership more expensive for many homebuyers and also help ease the intense competition in the housing market over the past year.
“Mortgage rates have risen for the seventh straight week as Treasury yields have continued to rise,” said Sam Khater, Freddie Mac’s chief economist. “While spring is typically the busiest season for homebuyers, the rise in interest rates has created some volatility in demand. It remains a seller’s market, but buyers who are still interested in buying a home may find that competition has eased somewhat.”
Right now, the cost of financing a home is 40% higher than it was a year ago, and demand for new homes is visibly cooling, according to Realtor.com.
“While wages are rising sharply due to severe labor market shortages, they continue to lag rapid inflation,” said George Ratiu, manager of economic research at Realtor.com. “Buyers who couldn’t secure their interest rate can’t afford the much higher payment for today’s homes.”
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Mortgage rates continue to rise
Mortgage rates are expected to continue rising as the Federal Reserve plans increase prices up to three times in 2022 and more in 2023.
“As consumer prices continue to rise, markets expect long-term interest rates to rise in the short term,” Ratiu said. “Additionally, the Fed’s forward guidance calls for a stronger increase in its short-term interest rate coupled with a possible reduction in balance sheet assets by mid-year.
“Both monetary measures will result in higher borrowing costs for credit cards, auto and personal loans, and mortgages,” he said. “Markets are also pricing in a likely 50 basis point hike at the next central bank meeting on May 4th, so we expect mortgage rates to continue to rise.”
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