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Although increasing, mortgage rates remain below 3%. But soaring home prices threaten to make home buying once again unaffordable for many Americans.
The 30-year fixed rate mortgage was on average 2.99% for the week ending August 20, up three basis points from the previous week, Freddie Mac FMCC,
reported Thursday. It was the second week in a row that rates had increased.
Meanwhile, the 15-year fixed rate mortgage jumped eight basis points to an average of 2.46%. The 5-year Treasury-indexed variable rate hybrid mortgage rose by one basis point to 2.91% on average.
A few factors drove mortgage rates higher. “Rates have risen because the US Treasury has issued a large number of notes and investors are looking for hopeful updates on COVID vaccine trials,” said George Ratiu, senior economist at Realtor.com.
Mortgage rates are roughly tracking the direction of the 10-year Treasury yield, which has remained at its highest level since early July in recent weeks.
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But another factor contributing to the rise in interest rates was the surprise announcement last week that Fannie Mae and Freddie Mac were charging a new ‘unfavorable market’ commission on mortgage refinances, a move that drew criticism. business groups, consumer advocates and legislators. sides of the aisle.
“The announcement by the [Federal Housing Finance Agency] applying a 0.5% fee to all mortgage refinancing loans caught lenders off guard, putting many in dire financial straits and forcing them to raise rates across the board – even for out-of-pocket loans. purchase, which are not directly affected by the new policy – in order to cover their losses, ”said Matthew Speakman, economist at Zillow ZG,
. The fees functionally raised the benchmark level of mortgage rates, Speakman said.
The rate hike comes as competition among buyers in the housing market remains extremely high. And that’s pushing home prices even further, given the housing shortage.
Also see:Refinancing your mortgage will cost more thanks to new fees from Fannie Mae and Freddie Mac
Median home prices rose 10.1% year-over-year for the week ending August 15, according to a new report from Realtor.com. It represents the fastest growing listing prices since January 2018.
(Realtor.com is operated by News Corp NWSA,
subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
“With supply and demand moving in opposite directions, sellers are clearly gaining the upper hand in the market as competition from buyers intensifies and prices pick up in the fall,” said Javier Vivas. , director of economic research for Realtor.com, in the report.
Rising interest rates could cool the real estate market a bit if it prompts some buyers to rethink home buying. But for those buyers who stay in the market, higher rates will make buying a home even more expensive.
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