Mortgage rates have reached their highest level in over a year, causing concerns for potential homebuyers. According to Mortgage News Daily, the average rate on a 30-year fixed mortgage crossed over 7% on April 1 and has continued to rise, currently sitting around 7.5%. This is the highest level since mid-November of the previous year.
Last October, rates hit their highest level in decades, leading to a slowdown in home sales. However, builders managed to stimulate demand by buying down rates for their customers, outperforming existing home sellers. Rates then fell to the mid-6% range in mid-January and remained there through February, resulting in a surge in home sales. Unfortunately, they began rising again due to expectations of increased inflation.
Danielle Hale, chief economist for Realtor.com, explains that the recent increase in inflation expectations and comments from Federal Reserve Chair Jerome Powell have reinforced concerns about inflation. As a result, mortgage rates are likely to continue rising, impacting home sales in the coming months.
Surprisingly, despite higher rates, mortgage applications for home purchases rose by 5% last week compared to the previous week, according to the Mortgage Bankers Association. However, demand is still 10% lower than it was at the same time last year, even with rates currently 70 basis points higher.
Joel Kan, MBA’s chief economist, suggests that this increase in application activity may be short-lived as affordability weakens further. While there is more supply on the market now compared to a year ago, it is still historically low. As competition increases, homes are being sold at a faster pace. Those hoping for significant rate drops may have to wait for an extended period.
Bob Broeksmit, MBA’s president and CEO, explains that recent economic data indicates the strength of the economy and job market, which will likely keep mortgage rates at their current elevated levels for the foreseeable future.
In conclusion, current mortgage rates have reached an annual peak and show no signs of slowing down. Potential homebuyers are facing higher rates, which may impact affordability and slow down the housing market. Despite this, mortgage applications have seen a slight increase, possibly due to buyers acting before rates rise further. However, experts suggest that the increase in application activity may not be sustainable as affordability continues to weaken. The current economic climate and job market strength are likely to keep mortgage rates at their elevated levels for the near future.
