The 30-year fixed-rate mortgage (FRM) surged this week to its highest level in more than 20 years, averaging 7.09%, which is also a fourth-straight week of rate hikes, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac released Thursday.
This week’s average is up from last week’s increase to an average of 6.96%, Freddie Mac reported. Here’s a look at this week’s numbers:
Highlights:
- 30-year fixed-rate mortgage averaged 7.09% as of August 17, 2023, up from last week when it averaged 6.96%. A year ago at this time, the 30-year FRM averaged 5.13%.
- 15-year fixed-rate mortgage averaged 6.46%, up from last week when it averaged 6.34%. A year ago at this time, the 15-year FRM averaged 4.55%.
What the experts are saying:
“The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” said Sam Khater, Freddie Mac’s chief economist. “The last time the 30-year fixed-rate mortgage exceeded seven percent was last November. Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales.”
Realtor.com economist, Jiayi Xu, commented:
“The Freddie Mac fixed rate for a 30-year mortgage jumped to 7.09% this week, reaching the highest level since spring 2002. Despite still-high prices and elevated interest rates, July’s retail sales data showed consumer spending continues to increase solidly as demand is being boosted by high wage growth. While this robust data might alleviate worries about an imminent recession, it could give rise to concerns that interest rates might stay elevated for an extended period. Meanwhile, it is worth noting that the Fed is moving cautiously to ensure that the effects of earlier rate hikes are fully revealed. As a result, the Fed may opt to take another “wait-and-see” strategy in the upcoming FOMC meeting, which may help potentially mitigate the recent upward trajectory of mortgage rates.
“The most recent labor market data indicates that households remain in a favorable economic position, which should provide a nice boost for housing demand. However, mortgage rates remain close to the highs seen in the past two decades and offset benefits stemming from declining home listing or selling prices. Unlike existing homeowners who could leverage near-record high home equity to reduce the size of mortgage loans, first-time home buyers are facing much more challenging market conditions. In fact, the homeownership rate among householders under 35 dropped from 39.1% in the second quarter of 2022 to 38.5% in the second quarter of 2023.
“Furthermore, with asking rents dipping for two consecutive months, potential first-time home buyers may not feel the same level of pressure to expedite their purchases as they did when rents were escalating at a double-digit pace. This may result in slower sales churn, but it also provides potential home shoppers with an extended timeframe to carefully consider crucial decisions during the home buying journey.”
