Mortgage rates are now at the highest level of the year, and could still climb
The average rate on the popular 30-year fixed mortgage crossed over 7% on April 1, according to Mortgage News Daily, and it just kept going. It now sits right around 7.5%, the highest level since mid-November of last year.
Rates hit their highest level in a few decades last October, causing home sales to grind to a halt. Builders jumped to buy down rates for their customers and managed to do better than existing home sellers.
Rates then fell through mid-January to the mid-6% range and held there into February, causing a surge in home sales. But then they began rising again.
“By mid-February, a pick-up in inflation reset expectations, putting mortgage rates back on an upward trend, and more recent data and comments from Fed Chair [Jerome] Powell have only underscored inflation concerns,� said Danielle Hale, chief economist for Realtor.com. “Sales data over the next few months is likely to reflect the impact of now-higher mortgage rates.�
Even with rates higher, however, mortgage applications to purchase a home rose 5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was still 10% lower than the same week one year ago, even with rates now 70 basis points higher than they were a year ago.
“Despite these higher rates, application activity picked up, possibly as some borrowers decided to act in case rates continue to rise,� said Joel Kan, MBA’s chief economist.
That may be short-lived, however, as affordability weakens even further. While there is more supply on the market now than there was a year ago, it is still at a very low level historically. That has caused homes to move faster as the competition increases. Anyone waiting for rates to drop significantly may be waiting for a while.
“Recent economic data shows that the economy and job market remain strong, which is likely to keep mortgage rates at these elevated levels for the near future,� said Bob Broeksmit, MBA’s president and CEO.