fbpx

Mortgage Rates Remain Near Multi-Year Highs

Mortgage Rates Remain Near Multi-Year Highs
Tiny house figurine with keys next to it, and a man in a suit filling out paperwork. | Image from Getty Images

Would-be home buyers are having a tough year purchasing as frequent rate hikes and increasing mortgage rates make it more costly to afford a home.

After a three-week increase, mortgage rates finally fell, dropping the average rate on a 30-year, fixed mortgage from 5.81% to 5.70%, according to Freddie Mac. This is up from 3.22% at the start of the year, resulting in the fastest acceleration in mortgage rates in decades.

While the decline provided some relief, mortgage rates remain near multi-year highs, making it the least affordable time to purchase a home in years, reports the Wall Street Journal.

The Federal Reserve’s interest-rate hikes and its contractionary monetary policy of quantitative tightening — used to pull back from the mortgage-bond market — have pushed mortgage rates to their highest levels since 2008. Mortgage payments on a median-priced home were about $800 higher in June than a year ago, according to Realtor.com.

“With inflation outpacing pay raises, most workers are seeing their income fall behind, further straining the finances of buyers who are also facing higher borrowing costs,” said George Ratiu, manager of economic research at Realtor.com.

In April, the median American household would have needed 41.2% of its income to cover mortgage payments on a median-priced home, the Federal Reserve Bank of Atlanta said this month. That is the highest share since July 2006 and well above the 30.8% recorded in April 2021.

Still, demand for homes continues to outpace the inventory of homes for sale. Nearly 60% of the homes sold in May were sold above their list price, according to real-estate brokerage Redfin Corp.

The drop in mortgage volume prompted by rising interest rates has created challenging conditions for lenders. Many that raked in record profits in 2020 and 2021 are laying off staff, selling servicing rights, and otherwise trying to survive.

First Guaranty Mortgage Corp. said Thursday it had filed for bankruptcy protection, citing a “dramatic collapse” in the market for home refinancing and a weakening market for home purchasing. The Plano, Texas, company said it is lining up financing to fund mortgages that have yet to close.

Overall loan originations are expected to fall 40% this year, dragged down by a 69% decline in refinancing, according to the Mortgage Bankers Association.

Support our non-profit journalism

Submit a Comment

Your email address will not be published. Required fields are marked *

Continue reading on the app
Expand article