Mortgage Rates Inch Higher To Nearly 7 Percentage
Average rates on 30-year fixed-rate mortgages rose this week, as housing activity slowed during the particularly busy spring home-buying season.
Mortgage rates rose slightly this week, bringing the 30-year mortgage rate closer to 7%. Fixed mortgage rates have increased across the board, while adjustable mortgage rates have decreased or remained largely unchanged.
Mortgage rates as of April 20, without discount points, unless otherwise noted, are as follows:
- 30-year fixed rate: 6.95% percentage (up from 6.92% percentage last week).
- 20-year fixed rate: 6.88% percentage (up from 6.8% percentage last week).
- 15-year fixed rate: 6.24% percentage (up from 6.14% percentage last week).
- 10-year fixed rate: 6.37% percentage (up from 6.28% percentage last week).
- ARM 5/1: 5.67% percentage (up from 5.66% (percentage) a week ago).
- ARM 7/1: 5.94% percentage (down from 6.2% percentage a week ago).
- ARM 10/1: 6.04% percentage (down from 6.07% percentage a week ago).
- 30-year jumbo loan: 7.06% percentage (up from 7% percentage a week ago).
- 30-year FHA loan: 6.08%, up 0.06 percentage points (up from 6% a week ago).
- VA purchase loans: 6.2% and 0.05 percentage points (up from 6.16% the week before).
The Fed raised its benchmark rate by 25 basis points at its March meeting, 50 basis points less than expected following the failure of major banks earlier that month. The Federal Open Market Committee will meet again on May 2 and 3, where policymakers will decide whether to raise the federal funds rate again or halt the rate hike process.
George Ratieu, chief economist at Keeping Current Matters, said the central bank is likely to continue raising interest rates at current rates despite clear signs of price stability. Inflation rose 5% annually, the slowest pace in nearly two years, but still above the Fed’s 2% target, according to the March Consumer Price Index (CPI) report.
According to Ratiu, the Fed will increase the policy rate by an additional 25 basis points at its meeting in May despite the fact that inflation is a concern.
Meanwhile, 30-year fixed mortgage rates will remain in the 6% to 7% range, Ratiu said, “as monetary policy tightens and price growth is still recovering.” The recent rise in interest rates has led to a retreat in mortgage application volume and home sales activity. This is despite us entering the usually busy spring home buying season.
Indicator of the week: The year of the ‘new normal’
In a moment of reflection, many economists pointed to the solemn anniversary. A year ago this week, mortgage rates fell 5% for the first time in more than a decade. Since then, interest rates have risen from above 5% to 6% in August and to over 7% in October a few months later.
While some home buyers may be comfortable with the current interest rate environment, others are still reluctant to borrow at rates close to 7%. This was shown in last week’s National Association of Realtors current home sales report, where home sales in March 2023 were 22% lower than in March 2022, while interest rates were 5%.
Last year’s home buyers were intimidated by 5% mortgage rates, but today’s home buyers will jump at the chance to grab 5% mortgage rates. New US News research has found that 66% of homebuyers would wait for mortgage rates to drop further before entering the market. 28% of them are waiting for the rate to fall below 6% and 30% are waiting for the rate to fall below 5.5%.
According to the survey, Sam Khatter, chief economist at Freddie Mac, said there would be a “modest” recovery in demand if rates did not fall into the mid-5% range. The rate is expected to fall to around 5% in 2023, but not until later this year when supply and demand may become more disconnected.
Plus, it’s not just mortgage affordability that’s keeping buyers on edge this spring. A shortage of housing inventory adds to the pain for homebuyers, who would otherwise be willing to re-enter the market. According to Zillow, inventory offered for sale improved slightly in March, but remains below pre-pandemic levels.
One reason for the low inventory of homes for sale is that existing homeowners are reluctant to sell and trade mortgage rates below 3% for higher mortgage rates. According to the survey, 25% of home buyers this year do not plan to sell their current home to buy their next home. Of homeowners planning to sell, 56% feared they would regret forgoing the low mortgage rate.
I don’t blame them. With mortgage rates unlikely to fall below their all-time low of 2.65% in January 2021, it’s no wonder many homeowners are stuck with low monthly payments.
