Freddie Mac says mortgage rates are climbing again

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Mortgage rates are on the rise again. The average rate for a 30-year fixed-rate mortgage is now 5.51%, according to Freddie Mac’s weekly benchmark rate survey.

The increase caps a two-week decline for the 30-year rate, which fell half a percentage point during that time. And that puts a little more pressure on buyers already struggling with higher mortgage payments and lower purchasing power.

“With the highest rates in over a decade, house prices at elevated levels and inflation continuing to impact consumers, affordability remains the biggest barrier to home ownership. property for many Americans,” Sam Khater, chief economist at Freddie Mac, said in a statement.

Other types of loans are also higher this week. The rate on a 15-year fixed-rate loan averages 4.67%, an increase of 0.22 percentage points. Meanwhile, the average rate for a 5/1 variable rate mortgage is up 0.16 percentage points to 4.35%.

What’s next for mortgage rates?

This week’s rate hike could signal the start of another rate uptrend.

On Wednesday, the Bureau of Labor Statistics released its consumer price report for June, showing a 1.3% increase between May and June. Compared to a year ago, prices rose 9.1%, the largest year-over-year increase since November 1981.

Some experts now expect much more aggressive action from the Federal Reserve to lower consumer prices. While a 0.75 percentage point hike in the federal funds rate is expected to be widely announced at the upcoming Federal Open Market Committee meeting in late July, some pundits are now talking about the possibility of a 1 percentage point hike. If that happens, mortgage rates will likely see another big jump.

“The Fed could be forced to raise interest rates even more aggressively than expected, even with the growing possibility of a recession on the horizon,” said Lawrence Yun, chief economist at the National Association of Realtors. “The mortgage market had already priced in several more rounds of Fed rate hikes, but may need to adjust a bit higher based on today’s uncomfortable inflation rate.

The cooling of the real estate market continues

Slowing home sales, falling mortgage application volumes and rapidly rising inventories are all signs of a slowing housing market.

Despite the current rise in mortgage rates, the market is slowly moving away from sellers and becoming more and more favorable to buyers. Falling demand and increasing supply for homes means buyers don’t have to compete as intensely and may take longer to find the right property for them – instead of being forced to buy a house because it was the only one available.

As a result, sellers must adapt to change. Many cities where homes received multiple offers and sold well above asking price are no longer the hotspots they were during the pandemic, said Sheharyar Bokarhi, senior economist at real estate brokerage Redfin, in a recent press release.

“Sellers are adjusting their expectations in real time as they realize they might not get the price their neighbors got two months ago,” Bokarhi said.

In Boise, Idaho, more than 60% of homes on the market saw a price reduction in June, according to the Redfin report, the largest share among the 97 metro areas surveyed. Denver and Salt Lake City, for their part, are seeing more than 50% of homes for sale drop in asking price.

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