In its latest Primary Mortgage Market Survey, the Federal Home Loan Mortgage Corporation (Freddie Mac) has revealed that the 30-year fixed rate mortgage average was 6.48 per cent, up from last week when it averaged 6.42 per cent. A year ago, the average was only 3.22 per cent.
Meanwhile, the 15-year fixed rate mortgage average was 5.73 per cent, up from last week when it averaged 5.68 per cent. A year ago, the 15-year FRM averaged 2.43 percent.
The report also noted that mortgage application activity sank to a 25-year low this week as spiking rates continued to weaken the housing market.
Sam Khater, Freddie Mac’s chief economist said: “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.
“Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market.
“Moreover, if rates [did] continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates.”
MBA figures
Meanwhile, a separate survey from the Mortgage Bankers Association (MBA) also found the same trajectory for rates and applications. In its figures, the MBA noted that the interest rate for 30-year fixed rate mortgages increased to 6.58 per cent from 6.42 per cent, while the average rate for 15-year fixed rates mortgages rose to 6.06 per cent from 5.97 per cent.
Meanwhile, it revealed that applications had decreased 13.2 per cent from two weeks earlier. These results included adjustments to account for the holiday period.
Joel Kan, MBA’s vice president and deputy chief economist, said: “The end of the year is typically a slower time for the housing market, and with mortgage rates still well above six per cent and the threat of a recession looming, mortgage applications continued to decline over the past two weeks to the lowest level since 1996.”
He added: “Purchase applications have been impacted by slowing home sales in both the new and existing segments of the market. Even as home-price growth slows in many parts of the country, elevated mortgage rates continue to put a strain on affordability and are keeping prospective homebuyers out of the market.”
Whether the direction of travel for the UK rates and applications follows the US is debatable, but as the saying goes: ‘When America sneezes, Britain catches a cold’.
