Mortgage rates jumped dramatically for the week ending March 24th to reach a three-year high, according to Freddie Mac’s weekly survey…(Freddie Mac)
- 30-YR FIXED: Averaged 4.42%, a 26 basis point increase from last week and the highest rate since February 28th, 2019. This is 125 basis points higher than one year ago.
- 15-YR FIXED: Averaged 3.63%, a 24 basis point increase from last week. This is 118 basis points higher than the same time one year ago.
Sam Khater, Freddie Mac’s Chief Economist, said in a release “In short, the rise in mortgage rates, combined with continued house price appreciation, is increasing monthly mortgage payments and quickly affecting homebuyers’ ability to keep up with the market.”
The Mortgage Bankers Association reported that housing affordability had already fallen in February thanks to rising rates and home prices, according to a new report…(MBA)
- “Homebuyer affordability decreased in February, with the national median payment applied for by applicants jumping 8.3 percent to $1,653 from $1,526 in January, the Mortgage Bankers Association reported Thursday.”
We have been in a very weird economic situation for the last year or so with rates rising along with home prices. It’s very unusual for home prices to move in the same direction as rates. The two usually have more of an inverse relationship. However, because rates had fallen so low during COVID that rates moving back up still made rising home prices affordable. This is likely to change moving forward. The Wall Street Journal did some basic math looking at the impact of higher rates in an article this morning, “The monthly payment on a 30-year mortgage for $500,000 carrying a 6.7% rate is $3,226, but it is $2,176 at 3.25%.” I don’t think anyone expects rates to reach 6.7% but it is a good example of the impact higher rates can have on purchasing power. Home prices are not expected to fall but that major slow down in prices that many have predicted for years might finally be visible on the horizon.