The continuous increase in Mortgage rates has threatened to push potential home buyers out of the market.
The mortgage rates have been increasing continuously for five straight weeks in the US. According to a statement from Freddie Mac, the government-backed home mortgage corporation, the interest rate for an average 30-year fixed home loan increased from 6.02% to 6.29%. The company data showed that rates of 10-year treasury yields have jumped, which is at the highest since October 2008.
The Federal Reserve increased benchmark interest rates by another 75 basis points. It signaled more hikes in the future in a bid to cool the housing market and inflation. Fed Chairman Powell said prices have been rising at an unsustainable fast level. The move by Fed will raise the mortgage rates even though it has doubled since the beginning of this year.
The housing frenzy during the pandemic, the lower affordability for buyers, and disturbing purchases have shut down options for those still on the hunt. As per data from the National Association of Realtors, previously owned home sales fell for the seventh consecutive month in August. This is the most extended period of decline in the housing market since the market last crashed in 2007.
Sam Khater, chief economist at Freddie Mac, said the housing market is facing headwinds. The softening of housing prices and a decrease in home sales remain. The number of sales of homes remains below the normal level.
Freddie Mac’s survey for mortgage lending is a closely watched barometer in the home loan sector; it has lagged in certain measures. The Mortgage News Daily has shown the current rates an average of 6.36% for a 30-year home loan at a fixed rate, up from last week’s rate of 6.3%.
As per Freddie mac’s current average interest rate, the monthly home loan installment for a $300,000 mortgage will come to $1,855. This is $554 more than what borrowers paid in January this year when the rates were 3.22 %.
George Ratiu, senior manager, and economist at Realtor.com, an economic research firm, said buyers face a double pinch. The net take-home pay is shrinking due to higher mortgage loan payments, and the shopping budget is decreasing because of higher commodity prices. For buyers, taking exposure to the housing market is unaffordable today. The price cuts in many locations look like the only option to restore affordability and demand for housing at the moment.
