In its latest Primary Mortgage Market Survey, the Federal Home Loan Mortgage Corporation (Freddie Mac) revealed that 30-year fixed rate mortgages averaged 7.23 per cent, up from last week when they were 7.09 per cent. A year ago, the average was 5.55 per cent.
Sam Khater, Freddie Mac’s chief economist, highlighted a robust economy and a dearth of housing supply as key reasons for the spike in rates.
He said: “This week, the 30-year fixed-rate mortgage reached its highest level since 2001 and indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short term.
“As rates remain high and supply of unsold homes woefully low, incoming data shows that existing homes sales continue to fall. However, there are slightly more new homes available, and sales of these new homes continue to rise, helping provide modest relief to the unyielding housing inventory predicament.”
The 15-year fixed rate mortgage also rose, averaging 6.55 per cent, up from 6.46 per cent last week. A year ago, the average stood at 4.85 per cent.
Applications tumble as rates rocket and supply plummets
A separate weekly survey from the Mortgage Bankers Association (MBA) also revealed a spike in 30-year fixed rate deals.
The MBA reported that the average rate for 30-year fixed rate mortgages rose to 7.31 per cent from 7.16 per cent last week, while the average rate for the 15-year equivalents increased to 6.72 per cent, from 6.57 per cent last week.
The MBA survey also noted that mortgage applications had decreased by 4.2 per cent from one week earlier.
Joel Kan, MBA’s vice president and deputy chief economist, said: “Treasury yields continued to spike last week as markets grappled with illiquidity and concerns that the resilient economy will keep inflation stubbornly high.
“This spike pushed mortgage rates higher last week, with the 30-year fixed rate increasing to 7.31 per cent – the highest level since December 2000. Applications for home purchase mortgages dropped to their lowest level since April 1995, as homebuyers withdrew from the market due to the elevated rate environment and the erosion of purchasing power.
“Low housing supply is also keeping home prices high in many markets, adding to the affordability hurdles buyers are facing.”
