The 30-year fixed-rate mortgage (FRM) increased from last week’s average of 7.57% to an average of 7.63% this week, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac released Thursday.
This week’s numbers:
- 30-year fixed-rate mortgage averaged 7.63%, up from last week when it averaged 7.57%. A year ago at this time, the 30-year FRM averaged 6.94%.
- 15-year fixed-rate mortgage averaged 6.92%, up from last week when it averaged 6.89%. A year ago at this time, the 15-year FRM averaged 6.23%.
The takeaways:
“Mortgage rates continued to approach eight percent this week, further impacting affordability,” said Sam Khater, Freddie Mac’s Chief Economist. “In this environment, it’s important that borrowers shop around with multiple lenders for the best mortgage rate. With research showing down payment is the single largest barrier to first-time homebuyers attaining homeownership, borrowers should also ask their lender about down payment assistance. Launched this week, Freddie Mac’s DPA One® tool helps lenders and homebuyers identify and take advantage of down payment assistance programs nationwide.”
Khater continued, “Not only are homebuyers feeling the impact of rising rates, but home builders are as well. Incoming data shows that the construction of new homes rebounded in September but as rates keep rising, home builders appear to be losing confidence. As a result, we expect construction to trend down in the short-term.”
Jiayi Xu, economist at Realtor.com, commented:
“The Freddie Mac fixed rate for a 30-year loan climbed 0.06 percentage points to 7.63% this week, with the 10-year Treasury yield surpassing 4.9% for the first time since 2007. This rise can be attributed to September’s hotter than expected retail sales data and a stronger than expected labor market. While under typical circumstances, such positive data would be a reason for cheer among investors and businesses, it has now raised concerns regarding the inflation outlook and the likelihood of further Federal Reserve interest rate hikes, which increase the possibility of mortgage rates hitting 8% in the coming months.
“With mortgage rates remaining near 20+ year highs in recent weeks, homeowners are hesitant to list their properties, resulting in a continual drop in the number of newly listed homes. This ongoing trend poses difficulties for prospective first-time home buyers in their quest to find a suitable home. In September 2023, the active inventory for entry-level homes, ranging in size from 750 to 1750 square feet, was down -6.5% year-over-year and -34.1% lower than four years ago (pre-pandemic). Furthermore, high mortgage rates have exacerbated the affordability struggles faced by first-time home buyers who lack the advantage of near-record high home equity to leverage. While the median listing price for a starter home stood at $300,000 in September 2023, the same level as September 2022, today’s first-time homebuyers would now need an annual household income of $81,360 to afford such a home, assuming a 6% down payment and a 0.51% private mortgage insurance rate. This figure is $8,120 higher than the recommended annual income from just a year ago. In contrast, the suggested annual household income needed to afford a $300,000 home with the same down payment and private mortgage insurance rate, but at September 2019’s mortgage rates, stood at $56,160.”
