After reaching their highest level in 23 years at 7.31% last week, the 30-year fixed rate mortgage continued to hold that record, averaging 7.49% this week, according to the latest Primary Mortgage Market Survey® (PMMS®) released by Freddie Mac Thursday.
This week’s numbers:
- 30-year fixed-rate mortgage averaged 7.49% as of October 5, 2023, up from last week when it averaged 7.31%. A year ago at this time, the 30-year FRM averaged 6.66%.
- 15-year fixed-rate mortgage averaged 6.78%, up from last week when it averaged 6.72%. A year ago at this time, the 15-year FRM averaged 5.90%.
What the experts think:
“Mortgage rates maintained their upward trajectory as the 10-year Treasury yield, a key benchmark, climbed,” said Sam Khater, Freddie Mac’s chief economist. “Several factors, including shifts in inflation, the job market and uncertainty around the Federal Reserve’s next move, are contributing to the highest mortgage rates in a generation. Unsurprisingly, this is pulling back homebuyer demand.”
Bright MLS Chief Economist Dr. Lisa Sturtevant commented:
“Freddie Mac (reported) that mortgage rates moved up this week, hitting the highest level since 2000. Mortgage rates generally follow trends in the 10-year Treasury yield, which reached a 16-year high this week before retreating slightly.
“At the beginning of the year, it was widely expected that mortgage rates would fall to around 6% by the end of 2023. However, now the question is whether rates will hit 8% this year. The gap between the yield on the 10-year Treasury and the rate on a 30-year fixed rate mortgage has been around 3%age points, so as the Treasury yield approaches 5%, an 8% mortgage rate does not seem unlikely.
“The housing market will take a big hit this fall if rates do hit 8%. Prices won’t drop dramatically, because inventory is still relatively low, but transactions could fall to levels not seen since 2010. The housing market will become a “market of necessity,” where the buyers and sellers that are in the market are only those who have to move because of changes in family, job or financial circumstances.
Adjustable-rate mortgages are becoming more popular. With an ARM, home buyers are able to secure a rate that is a%age point lower than a fixed-rate mortgage, with the expectation that they will be able to refinance in a couple of years. Homebuilders are buying down interest rates to attract buyers and sellers are increasingly offering concessions, including paying down points to lower the mortgage rate for buyers.
It’s likely that mortgage rates will not come down to 6% until the end of 2024, so both buyers and sellers should expect to be in this high-rate environment for the next year, with concessions and negotiations an increasingly common part of the transaction.”
