Home ownership is a dream that seems farther away each day for US residents. With inflation still on the rise, so are the long-term U.S. mortgage rates, preferred by many when choosing how to afford a house. This increase is not a good sign and could have further long term impact on the housing market.
Mortgage rates today
The Federal Home Loan Mortgage Corp., better known as Freddie Mac put the weekly average for 30-year mortgages at 6.88% for the second week of April 2024. The figure is 0.61% higher than the same period last year. 15-year mortgages also don’t escape the rise, figuring at 6,16%, 0,62% higher than last year.
The bad situation became worse on Monday, when the 30-year fixed mortgage rates reached 7.44%, getting dangerously close to the October 25, 2023 record high of 7.79%. The 15-year mortgage rate is still not as dire, coming up to just 6.85% and still a bit farther from the October 2023 figure of 7.03%.
The numbers are abysmal and not at all auspicious for what seems to be the start of homebuying season. Weather plays a part on the increase of homes for sale, as visits and moving are a lot more pleasant at this time of the year compared to the colder months, but there is no doubt that the rise on mortgage rates will cool down the interest of many homebuyers.
Coming out of pandemic era lows, the 30-year fixed mortgage rate has more than doubled in three years and there us no sign it will stop. The median monthly U.S. housing payment is now an all-time high of $2,747, which is significantly higher from last year’s figures.
The future of homebuying
With inflation continuing to rise at a faster than expected pace, the mortgage rates will continue to rise to. Redfin Economic Research Lead Chen Zhao said in a statement “For homebuyers, the latest CPI [consumer price index] report means mortgage rates will stay higher for longer because it makes the Fed unlikely to cut interest rates in the next few months. Housing costs are likely to continue going up for the near future, but persistently high mortgage rates and rising supply could cool home-price growth by the end of the year, taking some pressure off costs.”
And he is not the only one. Jamie Dimon, CEO of JPMorgan Chase, has also talked about “persistent inflationary pressures” and said the bank was prepared for “a very broad range of interest rates, from 2 percent to 8 percent or even more, with equally wide-ranging economic outcomes.”
A few percentage points don’t seem like such a big deal, but in the long run those hundreds of dollars a month extra add up to a lot and the loans will become unattainable for a big portion of both new and old homeowners.
Those already locked into a mortgage may decide it is easier to continue the path and attempt to pay down the loan as fast as possible, or refinance it to add a longer term or smaller payments, but newcomers to the market may just opt out altogether and continue renting or revisit housing alternatives rather that jump into a 30-year commitment they may not be able to afford comfortably.
The pattern is not new, and it already happened in late 2022 and early 2023 when mortgage rates suddenly skyrocketed because of the Federal Reserve aggressively hiking interest rates. It made homebuyers halt their processes and thus temporarily lowered the prices of homes. A small reprieve that is now over, low inventory and high demand due to people having postponed their purchases inflated the prices again and they are now, paired with the rising mortgage rates, unattainable for most.
