October 6, 2022

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Mortgage rates top 4% for the first time since 2019

Mortgage rates top 4% for the first time since 2019

The era of ultra-low mortgage rates is over.

The average 30-year fixed-rate mortgage reached 4% for the first time since May 2019,

Freddy Mac

Thursday said. At the beginning of the year, the average interest rate on America’s most popular mortgage loan was 3.22%. It hit a record low of 2.65% in January 2021 and spent more than half the year under 3%.

Home loan costs were rising before Federal Reserve decision Wednesday to raise interest rates for the first time since 2018. And while the Fed’s quarter-point move did not affect Freddie Mac’s weekly average of 4.16%, recorded before the central bank’s announcement, it is likely To send higher rates. Mortgage rates are closely related to the yield on 10-year US Treasuries, which tend to rise along with the Fed’s benchmark interest rate.

High borrowing costs are another challenge that potential homeowners are already facing Housing price hike. The average rate is around 4%, while still historically low, but sharply higher than the less than 3% rates that have been available for most of last year. And the last time the 30-year mortgage rate exceeded 4%, the median home price was $277,000 — 26% less than it is today.

The monthly payment on a $375,000 home with a 4% interest rate is $220 higher than the payment on a similarly priced home in December 2020, when prices were near record lows, according to Realtor.com data. With a 20% down payment, that would add $79,200 to a 30-year mortgage.

News CorpAnd the

Owner of The Wall Street Journal, he also operates Realtor.com under license from the National Association of Realtors.

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Higher rates are beginning to dampen the demand for mortgages used to buy homes. Mortgage purchase orders fell 3.9% in February compared to the same month last year, according to the Mortgage Bankers Association.

But economists said demand is lower than expected, in part because of a tight inventory. At the current pace of sales, there was a record 1.6-month home supply drop on the market in January, according to the National Association of Realtors.

“There are still a lot of people who can afford these high rates, maybe people who have some wealth or equity from previous generations,” said Salma Hebb, deputy chief economist at CoreLogic.

US home prices hit an all-time high in 2021, but those increases are expected to slow in 2022 thanks to a number of economic factors. Here’s what’s driving the housing market and what it could mean for potential buyers and sellers. Photo: George Fry/Bloomberg News

Higher prices will make it difficult for homeowners to save money by refinancing. The group of borrowers who could reduce their monthly payments by refinancing fell to about 4 million in February, down from nearly 18 million in February 2021, according to the mortgage data company.

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The sharp decline in refinancing is expected to reduce total single-family mortgage facilities by approximately 38% in the first quarter compared to the same period last year.

Fannie Mae

He said.

write to Orla McCaffrey at orla.mccaffrey@wsj.com

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