Mortgage rates are on the rise, and no one is spared.
The median rate on a 30-year fixed rate mortgage was 5% as of the week ending April 14, which is a 28 basis point increase from the previous week, Freddie Mac FMCC,
I mentioned on Thursday. One basis point is equal to one hundredth of a percentage point, or 1% of 1%.
It’s the first time since February 2011 that the benchmark mortgage product has reached 5%. Mortgage rates are now about two percentage points higher than they were during the leading spring home-buying season in 2021. This time last year, the average 30-year mortgage rate was a flat 3.04%.
The 15-year fixed-rate mortgage rose above the 4% threshold for the first time since 2018, averaging 4.17%. The 5-year Treasury-linked adjustable hybrid mortgage averaged 3.69%, up 13 basis points from the previous week.
“At a time when Americans are grappling with historically high inflation, the combination of high mortgage rates, rising home prices and a tight inventory makes the pursuit of home ownership the most expensive of a generation,” Sam Khater, chief economist at Freddy Mac, said in the report.
Earlier this week, 10-year Treasuries approached 2.8% but then calmed down. Mortgage rates roughly follow the trend of long-term bond yields, including the 10-year Treasury yield TMUBMUSD10Y,
Bond investors are taking a closer look at inflation metrics and the Federal Reserve’s stance. Some analysts have seen the latest consumer and producer price indices point to a peak in inflation, but others argue that it may be too early to announce a peak.
In the meantime, mortgage rates are going up – and this is putting a lot of pressure on buyers.
Joshua Shapiro, chief US economist at MFR Inc. , in a research note, citing mortgage application data.
Indeed, data from the Mortgage Bankers Association in recent weeks has shown a decline in FHA-backed mortgage applications, which economists see as an indication that first-time homebuyers are being pushed out of the market. FHA loans are more popular with first time buyers because they have less onerous eligibility requirements in terms of down payments and credit scores than Fannie Mae backed loans,
and Freddie Mac, although they usually come with higher mortgage rates.
But there is evidence that even the wealthiest homebuyers are also feeling the pain of rising prices. a recent report From real estate brokerage Redfin RDFN,
It found that mortgage rate locks for loans used to purchase second homes fell to the lowest level since May 2020.
While demand for these vacation properties was still 13% higher than pre-pandemic levels, Redfin researchers noted that historically rapid rises in mortgage rates have priced out the buyers with the most money.
“The spurt in holiday home sales is coming to an end with mortgage rates rising at their fastest pace in history, causing some second home buyers to pull back,” said Taylor Marr, Redfin’s deputy chief economist in the report.
Marr added that new loan fees affecting mortgages for second homes will likely also have an impact on buyer demand, while stock market volatility may have reduced some of the payments made to these buyers. However, it is a worrying sign for the broader housing market.
“When prices and prices are so high that a vacation home seems more like a burden than a good investment and a fun place to bring your family on the weekends, a lot of potential buyers have other ideas,” Marr said.
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