Washington DC
CNN
—
U.S. mortgage rates rose this week to their highest level in nearly 23 years as inflationary pressures persist.
The average interest rate on a 30-year fixed-rate mortgage was 7.31% for the week ending Sept. 28, up from 7.19% the previous week, according to data released Thursday by Freddie Mac. A year ago, the 30-year fixed rate was 6.70%.
“30-year fixed-rate mortgages have reached their highest level since 2000,” Sam Cater, chief economist at Freddie Mac, said in a statement. “However, unlike at the turn of the millennium, today’s home prices are rising along with mortgage rates, largely due to inventory shortages. These headwinds are causing both buyers and sellers to hold out in search of better conditions. There is.”
Average mortgage rates are based on mortgage applications received by Freddie Mac from thousands of lenders nationwide. The survey included only borrowers with a 20% down payment and good credit.
Mortgage rates have soared during the Fed’s historic campaign to curb inflation, and although considerable progress has been made since June 2022, when inflation hit 9.1%, Fed officials say they still have a ways to go. It has said.
The core consumer spending index, the Fed’s preferred measure of inflation, is currently 4.2%, more than double the Fed’s 2% target. Economists expect it to fall to 3.9% when the latest figures are released on Friday.
Daniel Hale, chief economist at Realtor.com, said this week’s rise in mortgage rates is an extension of last week’s modest rise as investors settled for “longer-term” rates after last week’s Fed policy meeting. He said it was a follow-up to.
Hale said the takeaway from the meeting was that the Fed’s upward adjustments are not over yet.
“Based on revised economic forecasts, further rate hikes this year are definitely on the table, and the expected policy rates for 2024 and 2025 are also higher than previously expected,” he said. “Market participants are still playing catch-up.”
Although the Fed does not directly set the interest rates that borrowers pay on their mortgages, its actions do affect borrowers.
Mortgage rates tend to be tied to the yield on the 10-year U.S. Treasury, which fluctuates based on a combination of expectations for Fed action, what the Fed actually does, and investor reaction. As Treasury yields rise, mortgage interest rates also rise. When interest rates fall, mortgage rates tend to follow suit.
The yield on the 10-year US Treasury rose from 4.3% on September 20th to 4.6% as of September 27th.
According to the Mortgage Bankers Association, the number of mortgage applications continued to decline last week as mortgage rates rose.
“Interest rates above 7% and low inventory for sale continue to pose affordability challenges for prospective buyers,” said Bob Bruksmit, MBA President and CEO. Ta. “We expect housing market activity to continue to slow until interest rates begin to return.”
There are an unusually low number of homes for sale on the market as homeowners are stuck with ultra-low interest rates, a few percentage points below current rates.
According to Realtor.com, there has been a slight increase in the number of newly listed homes coming onto the market in recent weeks, but Hale said this is seasonal.
He said the first week of October tends to be an ideal week to buy a home because home prices tend to fall compared to their summer highs and there are fewer buyers competing for homes. But Hale said housing inventory remains higher than normal weeks.
However, he added that mortgage rates remain a wild card, potentially making it impossible for some buyers to enter the market at this time.
Hale said the market is pushing up prices as the few remaining buyers compete for the few available homes, even though there are so few people selling homes and demand is down. That’s what it means.
This rise in prices and mortgage rates stands in contrast to the rent relief of the past few months. This could lead first-time buyers to wait for house prices and mortgage rates to stabilize before renting instead.
“Purchasing a starter home is more expensive than renting in all but three major U.S. markets.” [Realtor.com] “This explains why buyer demand is likely to remain relatively low,” Hale said.