Mortgage Rates Hit Highest Level in 13 Years
Mortgage rates hit their highest level since August 2009 this week, following a sharp increase in the 10-year Treasury yield and continuing a breakneck ascent since the start of 2022. The rate on the 30-year fixed mortgage increased to 5.27%. Mortgage rates have climbed over a half-point in the last four weeks and are up 2 percentage points from the start of the year. The rapid increase in rates — tied to the Federal Reserve’s moves to hike interest rates to curb inflation — may be finally cooling the once-blistering hot housing market as affordability challenges become untenable for buyers. “While housing affordability and inflationary pressures pose challenges for potential buyers, house price growth will continue but is expected to decelerate in the coming months,” said Sam Khater, Freddie Mac’s chief economist. The cost of financing 80% of a typical home listed for sale has increased by nearly 50% in the last year. Housing affordability has worsened in the first quarter of 2022, with the monthly payment for an average existing home with a 20% down payment up $1,383, which is $319 or 30% more than a year ago. Families are spending 18.7% of their income on mortgage payments, compared with just 14.2% a year ago. The number of homes under contract declined for the fifth straight month in March. Closed sales of previously owned homes and new homes also registered declines, showing signs of a weakening housing market. 3.2% of homes for sale each week had a price drop, with 13% lowering their price in the past four weeks. That’s up from 10% a month ago and 9% a year ago. Still, the average home sold for 2.4% above asking price. According to the Mortgage Bankers Association, the share of refi activity was still 71% lower than the same week a year ago. The 10-year Treasury yield – which mortgage rates tend to track – topped 3% after the Fed’s half-point rate hike. “Mortgage rates are an incredibly important channel through which Fed policy affects the real economy,” Realtor.com Chief Economist Danielle Hale said in a press statement. “In other words, the Fed’s decisions impact household budgets, balance sheets, and spending decisions via their impact on interest rates like mortgage rates.”
