Volatile mortgage rates jumped back to the mid-5% level this week, slowing down the housing market, according to the latest survey from Freddie Mac.
The 30-year fixed-rate mortgage increased 42 basis points this week to an average of 5.55%, up from last week’s 5.13%. A year ago this time, rates averaged 2.87%. The index compiles purchase mortgage rates reported by lenders during the past three days.
“The combination of higher mortgage rates and the slowdown in economic growth is weighing on the housing market,” Sam Khater, chief economist at Freddie Mac, said in a statement. “Home sales continue to decline, prices are moderating, and consumer confidence is low. But, amid waning demand, there are still potential homebuyers on the sidelines waiting to jump back into the market.”
On HousingWire’s Mortgage Rates Center, Black Knight’s Optimal Blue OBMMI pricing engine measured the 30-year conforming mortgage rate at 5.741% Wednesday, up from 5.505% the previous week. Meanwhile, the 30-year fixed-rate jumbo was at 5.529% Wednesday, up from 5.323% the week prior.
Higher mortgage rates reflect the Federal Reserve’s continuing actions to control persistent inflation. The Fed raised interest rates by 75 basis points in July’s meeting, marking its fourth rate hike this year.
According to the meeting minutes, the Fed sees more hikes in the future – the Fed’s next meeting is on September 20 and 21 –, but the pace could slow given that the Consumer Price Index (CPI) in July was flat from the previous month.
So far, mortgage rates at the 5% mark brought applications to the lowest level in two decades, according to the Mortgage Bankers Association (MBA).
The market composite index, a measure of mortgage loan application volume, declined 1.2% for the week ending Aug. 19. The refinance index had a 2.75% decline from the previous week, and the purchase index was down 0.5%.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.85% with an average of 0.8 points, up from last week’s 4.55%. The 15-year fixed-rate mortgage averaged 2.17% a year ago. The 5-year ARM averaged 4.36% this week, down from 4.39% the previous week. The product averaged 2.42% a year ago.
Looking ahead, Fannie Mae’s Economic and Strategic Research Group expects total home sales to decrease 16.2% in 2022, a further downward revision from July’s projected drop of 15.6%.
“Housing remains clearly on the downtrend — and has been for several months now — due to the combined effects of outsized home price increases and the significant and rapid run-up in mortgage rates,” Fannie Mae’s Chief Economist Doug Duncan said in a statement.