The average interest rate for America’s most common home loan has reached a high not seen in more than 10 years, Freddie Mac said Thursday.
The 30-year fixed-rate mortgage sits at 5%, up from 4.72% last week, according to the mortgage-lending giant’s latest weekly Primary Mortgage Market Survey. At this time last year, the average was at 3.04%.
“This week, mortgage rates averaged five percent for the first time in over a decade,” said Sam Khater, Freddie Mac’s chief economist. “As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation.”
Rates for 15-year fixed-rate mortgage loans climbed to 4.17% according to the survey, up from an average of 3.91% last week and 2.35% a year ago.
For a 5-year Treasury-indexed hybrid adjustable-rate mortgage, rates are now averaging 3.69%. Last week, the 5-year ARM was at 3.56%, and the same time a year ago it averaged 2.8%.
Rising mortgage rates are not a surprise given the bargain rates homeowners obtained during the COVID-19 pandemic and the Federal Reserve’s quarter-point hike last month aimed at tackling the surge in inflation that has accompanied the economy’s recovery from shut-downs.
Economists expect rates to climb further throughout the year. The Fed has signaled more increases will come as the central bank tries to cool inflation, which is currently at a 40-year high.
The rising rates are already impacting consumer behavior in the housing market. The latest data from the Mortgage Bankers Association show borrower’s interest in adjustable-rate mortgages surged 7.4% last week, the highest share since mid-2019.
The MBA also found that refinancing applications declined by 5% last week to pre-pandemic levels.
While the housing market is expected to slow as rates increase, demand remains strong. Both conventional and government purchase applications rose last week, according to the MBA’s latest survey.
