Mortgage rates sailed past 5% this week with the 30-year fixed-rate mortgage averaging 5.11%, according to the latest Primary Mortgage Market Survey® released by Freddie Mac Thursday.
Key survey findings:
- 30-year fixed-rate mortgage averaged 5.11% with an average 0.8 point as of April 21, 2022, up from last week when it averaged 5.00%. A year ago at this time, the 30-year FRM averaged 2.97%.
- 15-year fixed-rate mortgage averaged 4.38% with an average 0.8 point, up from last week when it averaged 4.17%. A year ago at this time, the 15-year FRM averaged 2.29%.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.75% with an average 0.3 point, up from last week when it averaged 3.69%. A year ago at this time, the 5-year ARM averaged 2.83%.
“Mortgage rates increased for the seventh consecutive week, as Treasury yields continued to rise,” said Sam Khater, Freddie Mac’s chief economist. “While springtime is typically the busiest homebuying season, the upswing in rates has caused some volatility in demand. It continues to be a seller’s market, but buyers who remain interested in purchasing a home may find that competition has moderately softened.”
Nadia Evengelou, senior economist and director of forecasting for the National Associaition of REALTORS®, commented: “Mortgage rates continued to surge for the seventh straight week. According to Freddie Mac, the 30-year fixed mortgage rate rose to 5.11% from 5% the previous week. As a result, home buyers need to earn about $25,000 extra if they want to buy the typical home now compared to a year earlier.
“While people need to spend more of their budget on housing to buy a home, it seems the housing market has started to cool. Existing home sales dropped by 3% in March compared to February as mortgage rates rose nearly one percentage point.
“This headline figure is the seasonally-adjusted figure that is reported in the news. However, this was not the actual number of sales but the number of sales after adjusting for seasonality. According to the raw count of sales (not seasonally adjusted), existing-home sales improved compared to February by 30 percentage points. Then, compared with the historical average, existing-home sales also outperformed. Nearly 460,000 homes were sold in March while about 420,000 homes are typically sold during this month. Thus, home sales were higher than the historical average by about 8 percentage points. Nevertheless, home sales were 16% and 11% above the historical average level in January and February, respectively. This indicates that the market has lost steam due to higher mortgage rates.
realtor.com®’s Manager of Economic Research, George Ratiu, commented, “The Freddie Mac fixed rate for a 30-year loan kept marching up this week, following the continued surge in the 10-year Treasury which crossed the 2.8% mark for the first time since December 2018. Investors welcomed the better-than-expected increase in new residential construction while continuing to keep an eye on inflation. With consumer prices continuing to rise, markets expect long-term interest rates to push higher over the short term. In addition, the Fed’s forward guidance projects sharper increases in its short-term rate, coupled with potential reduction in balance sheet assets by midyear. Both monetary actions will translate into higher borrowing costs for credit cards, auto and personal loans, and mortgages. Markets are also pricing in a likely 50 basis point hike at the central bank’s next meeting on May 4th, so we expect mortgage rates to continue to rise.
“Real estate markets have been feeling the impact of monetary shifts, as mortgage rates rose sharply over the past four months,” Ratiu continued. “With the cost of financing a home about 40% higher than a year ago, demand for homes is visibly cooling, as many first-time buyers find themselves unable to qualify for a mortgage on a home that meets their needs. While wages are seeing strong gains due to the significant labor market shortage, they continue to lag behind fast-paced inflation. Buyers who weren’t able to lock their rate are finding themselves unable to afford the much higher payment on today’s homes. We’re starting to see this in market activity, with March’s existing home sales data showing a 2.7% decline. It’s not surprising that sales have been dropping sharply at the entry-level compared to a year ago, however we’re beginning to see the combination of tight inventory and rising rates taking a toll on sales in the midrange of the market as well. In addition, Realtor.com’s latest weekly data highlight that median list prices are losing steam, with a noticeable moderation in the growth trajectory over the past four weeks. The Fed’s intent of cooling demand seems to be working, leading housing markets toward a much-needed balance.”
