Mortgage rates continued their upward trajectory for the fourth week in a row crossing over the dreaded 6.0% mark, according to the Freddie Mac weekly survey.
- The 30-year fixed jumped 13 basis points to average 6.02% for the week ending September 15th. Rates are now 316 basis points higher than one year ago and are now at their highest level since late 2008.
- The 15-year was up 5 bips to 5.21% and the 5/1 ARM saw a big 29 basis point jump to 4.93%.
Affordability Problems. Yahoo Finance reports that it now takes 35.51% of the median household income to make a principal and interest payment on the median home with 20% down. This is the highest PTI ratio since October 1985 when it took 36.01% of household income to make that payment.
- A $200 Month. On August 18th, the 30-year fixed was at 5.13%. Just four weeks later rates are up almost a full point. A $400k house at 5.13% with 10% down has a payment of $1,961. Meanwhile, the same house with the same amount down has a monthly payment of $2,163 with a 6.02% rate. That’s a $200 swing in just one month.
Downward Pressure. Sam Khater, Freddie Mac’s Chief Economist, said that rising rates normally would put downward pressure on prices but inventory continues to remain a problem. “Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”
BOTTOM LINE: Until inflation gets under control rates are going to remain elevated and volatile. Timing the market just got that much harder.