Mortgage rates have skyrocketed in recent months – adding $ 33,000 on average to a 30-year loan
Mortgage rates have stabilized over the past week, but their recent rally may create challenges for homebuyers who are already feeling the pain of high home prices.
The 30-year fixed rate mortgage was on average 3.18% for the week ending April 1, up one basis point from the previous week, Freddie Mac FMCC,
reported Thursday. This is the seventh week in a row that the benchmark mortgage rate has climbed, and the rate is now at its highest level since June 2020.
The 15-year mortgage and the 5-year Treasury-indexed variable rate hybrid mortgage have both remained unchanged over the past week at 2.45% and 2.84% respectively.
Mortgage rates are still fairly low historically, but their recent rise has real financial implications for homebuyers today.
The rise in mortgage rates over the past two months means buyers will spend an additional $ 93 per month on their mortgage payments, said George Ratiu, senior economist at Realtor.com. This works out to about $ 1,100 per year, or about $ 33,000 over the life of a 30-year loan.
First-time buyers find it impossible to compete
“Many first-time buyers find it impossible to compete with regular buyers with considerable capital from their previous home or all-cash institutional investors willing to forgo all eventualities,” Ratiu said. “Rising mortgage rates add another hurdle for these buyers to overcome.”
There are already signs that some buyers are calling on him to leave the current real estate market. In early 2021, homebuyer demand was 25% above pre-COVID levels, Freddie Mac chief economist Sam Khater said in this week’s rates report. Today, demand is only 8% above pre-COVID levels.
There are signs that some buyers are calling him to leave the current real estate market.
“Although mortgage rates remain low, we are starting to see a pullback in those looking to enter the housing market,” Khater said. “This is confirmation that while purchase demand remains strong, the marginal buyer is feeling the tightening affordability resulting from rising mortgage rates and house prices.”
Falling demand could end up being a good thing for buyers who stay in the housing market. In January, house prices recorded their biggest annual increase since 2006, according to the last edition of the S&P CoreLogic Case-Shiller House Price Index. But that report reflects deals that were signed in November and December, as mortgage rates fell to historically low levels.
Slower competition caused by rising mortgage rates will slow the pace of house price growth, according to a report of CoreLogic CLGX,
“Slowing competition is likely to take some wind out of the sails of the market, slowing the rate of house price growth by about half by the end of the year,” the economist noted. CoreLogic Assistant Selma Hepp in the report.