Freddie Mac Mortgage Rates Top 6%, With No Sign of a Slowdown

·3 min read
Money; Getty Images
Money; Getty Images

The recent climb in mortgage rates continued as worries of a recession ramped up once again.

The average rate on a 30-year fixed-rate loan increased to 6.02% for the week ending September 15, according to Freddie Mac’s weekly rate survey. It’s the first time the 30-year rate has crossed over 6% since May 2008.

Rates have been steadily increasing through the year and are now almost 3 percentage points higher than they were the first week of January this year, one of the fastest paces of increase in Freddie Mac’s history.

Rates on other loan categories were higher this week as well. The 15-year fixed-rate mortgage is averaging 5.21% and the 5/1 adjustable-rate mortgage is averaging 4.93%.

Where mortgage rates are heading and how they affect the housing market

In light of yesterday’s inflation report showing that August consumer prices actually increased 0.1% from July, markets abandoned any lingering hope that the Federal Reserve will ease back on interest rate hikes at the Federal Open Market Committee meeting.

“Markets are keeping a close eye on the central bank’s meeting next week, expecting another 75-basis point increase in the policy rate, if not a 100-basis point jump,” said George Ratiu, manager of economic research at Realtor.com, in a statement.

As a result, mortgage rates will likely continue to increase in the near future, putting additional strain on a housing market that has seen a sharp drop in activity over the past few months. The number of mortgage applications has decreased for 10 of the last 11 weeks, according to data from the Mortgage Bankers Association.

With mortgage rates more than double what they were a year ago, many potential buyers are facing an affordability crisis. The monthly payment on a median-priced home is now about $2,100, an increase of 66% compared to a year ago, notes Ratiu.

“Many first-time homebuyers are finding the door to homeownership is closed,” he added.

The housing market has shifted away from the record-high home prices and bidding wars that were hallmarks of the pandemic. Slowing demand has led to an increase in inventory, less competition for available homes and more home sellers selling below list price.

As a result, consumer confidence in the housing market has seen a turnaround. A recent Fannie Mae survey found that consumers are expecting home prices to fall for the first time in two years, although how far they fall is unsure.

“Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate,” said Freddie Mac chief economist Sam Khater, adding that while prices are likely to continue their downward trend, the declines “should not be large.”

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