Mortgage rates increased again, rising to a level not seen since summer 2019.
The 30-year fixed-rate mortgage averaged 3.92% in the week ending February 17, up from 3.69% the week before, according to Freddie Mac. It has not been this high since May 2019 when it was at 3.99%.
Mortgage rates jumped again because of high inflation and stronger than expected consumer spending, said Sam Khater, Freddie Mac’s chief economist.
“As rates and house prices rise, affordability has become a substantial hurdle for potential homebuyers, especially as inflation threatens to place a strain on consumer budgets,” said Khater.
The increase last week followed the recent rise in Treasury yields, which have moved higher due to inflationary pressures and market expectations of more aggressive policy moves by the Federal Reserve, said Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting.
As mortgage rates rise refinancing benefits fewer homeowners. As a result, the share of applications that were refinances was at its lowest level since July 2019, Kan said, adding that refinance applications fell 9% last week and stood at around half of last year’s pace.
Applications for mortgages to purchase a home also saw a decline over the week, Kan said.
“Prospective buyers still face elevated sales prices in addition to higher mortgage rates,” Kan said. The mix of more conventional loans has pushed the average loan size to yet another record of $453,000, he noted.
Rising home prices combined with limited inventory have created a one-two-punch for buyers, with fewer homes affordable to buyers based on their income level, said Danielle Hale, Realtor.com’s chief economist.
That was the case even before mortgage rate increases, which have upped the monthly cost of the typical $375,000 home listing by roughly $115 since December, she said.
“Looking ahead, we expect rising incomes to help home shoppers navigate rising housing costs, but buyers will also likely have to make compromises to be successful,” said Hale.
