30-year mortgage at 5% for the first time in 11 years

The 30-year fixed mortgage rate fell to 5% this week for the first time in more than a decade.

According to data released Thursday by Freddie Mac, the average for 30-year fixed rates climbed to 5% with an average of 0.8 points. (A point is a commission paid to a lender equal to 1% of the loan amount. It is added to the interest rate.) It was 4.72% a week ago and 3.04% a week ago. one year old. The last time the 30-year fixed average exceeded 5% was in February 2011.

Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders across the country to arrive at weekly national averages. The survey is based on mortgages on the purchase of a home. Refinance rates may be different. It uses rates for high quality borrowers with strong credit scores and large down payments. Due to criteria, these rates are not available to all borrowers.

According to Freddie Mac, the average of 15-year fixed rates jumped to 4.17% with an average of 0.9 points. It was 3.91% a week ago and 2.35% a year ago. The five-year average of revisable rates is 3.69% with an average of 0.3 points. It was 3.56% a week ago and 2.8% a year ago.

“The Freddie Mac fixed rate for a 30-year loan maintained momentum this week as markets reacted to the latest consumer price data, which accelerated in March at a pace not seen since 1981,” said George Ratiu, head of economic research at Realtor.com, said. “After approaching 2.8% earlier in the week, the 10-year Treasury fell slightly as investors took the slight moderation in the core consumer price index as a signal that we have peaked. inflation. However, hopes of a cooling may be premature, given soaring producer prices, which have risen at the fastest pace on record.”

An online rate survey in Arkansas on Thursday showed some lenders are charging slightly more than the national Freddie Mac average for conventional 30-year mortgages. US Bank quoted rates from 5.25% to 5.327% and Arvest Bank promoted a rate range of 5.5% to 5.579%. Nerdwallet.com reported on Thursday that the average rate in Arkansas on Thursday was 4.923%.

The year-to-date hit to homebuyer affordability is equivalent to a further 20% increase in home prices, said Greg McBride, chief financial analyst at Bankrate.com.

“For buyers under 35, a rate of 5% is uncharted territory,” he said. “The speed at which rates rise will cool the housing market by reducing demand. But that can only mean housing goes from sizzling to hot. Demand still exceeds what is a record level of supply.”

UP PRESSURE

Mortgage rates are pushed up by rising inflation. The consumer price index, released by the Bureau of Labor Statistics on Tuesday, showed prices rose 8.5% in March from a year ago. It was the largest annual increase since December 1981. On Wednesday, the BLS released the March Producer Price Index, which tracks prices paid by wholesalers. It climbed 11.2% from a year ago, its biggest rise since 2010.

Inflation causes fixed income investments such as bonds to lose value, so investors demand more in return for holding them. When yields rise sharply, it’s because investors want to be paid more for long-term loans.

The 10-year Treasury note hit 2.79% on Monday. It has fallen in recent days, closing at 2.7% on Wednesday. The 10-year rate started the year at 1.63% and just over a month ago was below 2%.

Since mortgage rates tend to follow the same trajectory as long-term bonds, they have also risen.

“Inflation pushes mortgage rates up in two ways,” said Holden Lewis, real estate and mortgage expert at NerdWallet. “First, interest is the price we pay for money, and the price of money goes up like everything else. Second, the Federal Reserve raises interest rates to control inflation. These forces work together to raise mortgage rates.”

It’s not just rising interest rates that are making home loans more expensive. Effective April 1, the Federal Housing Finance Agency implemented increased fees for certain Fannie Mae and Freddie Mac home loans. Mortgages that the FHFA considers “high balance” or second home mortgages are now more expensive.

High balance loans are mortgages above the national compliant benchmark limit ($647,200). Fees for high-balance loans increased between 0.25% and 0.75%, scaled by loan-to-value ratio. Fees for secondary real estate loans increased between 1.125 and 3.875%, scaled by loan-to-value ratio.

MORE SOON

Bankrate.com, which publishes a weekly index of mortgage rate trends, found that more than half of surveyed experts expect rates to rise in the coming week.

“The Fed is in full sell-off mode on 10-year Treasuries,” said Ken H. Johnson, a real estate economist at Florida Atlantic University. “Last week, more than 20% of 10-year market volume was sold off by the Fed. With this volume of one-sided activity, long-term mortgage rates, which track 10-year Treasury yields, can only increase.”

Meanwhile, mortgage applications fell again last week. The composite market index – a measure of the total volume of loan applications – fell 1.3% from the previous week, according to data from the Mortgage Bankers Association.

The Refinance Index slipped 5% and was down 62% from a year ago. The volume of refinancing requests remains at its lowest level since the spring of 2019. The purchase index increased by 1%. The refinancing portion of the mortgage business accounted for 37.1% of applications.

“Higher rates increase borrowers’ interest in [adjustable rate mortgages]”Their share of applications last week was 7.4%, which was the highest share since June 2019. In a promising sign of strong demand for procurement amid accessibility challenges, both conventional and government procurement requests have increased.”

The sudden rise in borrowing costs, in a market where buyers across the country are already struggling to afford a home, would normally spell a loss for home sales and home prices. But in the unusual pandemic recovery economy of rising wages, supply chain disruptions and changes to the way Americans live and work, it’s unclear how much of a difference higher rates will make. important.

Economists generally believe that the rate hike will cool the market down a bit, at least compared to the past two years of double-digit price gains. There are some early indications that expensive markets on the East and West Coasts are already seeing a slight decline in buyer interest.

The problem in the housing market and in the economy in general is that there is not much to buy. The inventory of homes for sale remains extremely tight, with many more buyers than sellers. This means that while rising rates will push many potential homeowners out of the market or into a lower price range, there is still more demand than houses on the market.

A typical homebuyer’s payment has increased by 35% in just a few weeks, according to Redfin, a national real estate agency. This burden is added to the high prices of food, gasoline, cars, furniture and much more.

On Thursday, Redfin said its homebuyer demand index was down 3% over the past month.

Information for this article was provided by Kathy Orton of The Washington Post, Conor Dougherty of The New York Times and Prashant Gopal of Bloomberg News (TNS).

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