The 30-year fixed rate mortgage continued its upward trajectory this week, increasing to 7.57%, up from last week’s increase to 7.49%, according to the latest Primary Mortgage Market Survey® (PMMS®) released by Freddie Mac Thursday.
This week’s numbers:
- 30-year fixed-rate mortgage averaged 7.57% as of October 12, 2023, up from last week when it averaged 7.49%. A year ago at this time, the 30-year FRM averaged 6.92%.
- 15-year fixed-rate mortgage averaged 6.89%, up from last week when it averaged 6.78%. A year ago at this time, the 15-year FRM averaged 6.09%.
What the experts think:
“For the fifth consecutive week, mortgage rates rose as ongoing market and geopolitical uncertainty continues to increase,” said Sam Khater, Freddie Mac’s chief economist. “The good news is that the economy and incomes continue to grow at a solid pace, but the housing market remains fraught with significant affordability constraints. As a result, purchase demand remains at a three-decade low.”
Realtor.com Senior Economic Research Analyst Hannah Jones commented:
“The Freddie Mac fixed rate for a 30-year mortgage climbed again this week, increasing 8 basis points to 7.57%. Though the weekly movement settled from last week’s surge, rates reached another 20+ year high and remained more than 4 points higher than two years ago. Last week’s jobs report exceeded investor expectations with 336,000 net new jobs, resulting in a late-week surge in the 10-year treasury yield and a bump in mortgage rates. However, the yield on the 10-year treasury note reversed trend and fell at the beginning of this week as investors took refuge in bonds amid geopolitical uncertainty. While last week’s jobs report put upward pressure on rates, concerns over the conflict in Israel drove investors to the safe haven of bonds, applying downward pressure on rates. As a result, mortgage rates continued climbing, but the week-over-week increase lost some steam.
“Today’s would-be buyers and homeowners continue to face challenges participating in the market due to both elevated mortgage rates and still-high home prices. The Fed’s ‘higher for longer’ monetary policy is keeping upward pressure on rates, making a descent unlikely until new data suggests that inflation is moving in the right direction. September’s CPI inflation data showed that headline inflation held steady at 3.7%, while core inflation continued its steady decline, landing at 4.1%, its lowest level in two years. Inflation continues to improve, but remains well above the target 2%, emphasizing the long road to bring prices back to a healthy level. Mortgage rates rose past 6% in September 2022, and have remained above that threshold since, marking the first stint of 6-plus% mortgage rates since the early 2000’s. Though buyers have shown signs of adjusting to the higher-rate environment, limited inventory has kept home prices elevated, cutting further into the buying power of shoppers hoping to find a suitable home.
“Prospective buyers have had to get creative to prepare financially for homeownership. In a recent survey, Realtor.com found that almost a third of respondents reported that they have moved in with their parents or other family members in order to save for a home purchase. Unsurprisingly, younger respondents were the most likely to consider this route. Young buyers, many of whom are first time buyers, are in a uniquely challenging position. While many repeat buyers can leverage existing home equity in today’s expensive market, younger shoppers may have a harder time coming up with the money for a home purchase. At today’s mortgage rate, a household income of at least $120,000 is recommended to purchase a median-price US home, assuming a 20% down payment. On the upside, the median rent for a 0-2 bedroom home has fallen on an annual basis for the past four months, offering would-be buyers more affordable rental options to take time and evaluate their decision to purchase a home.”