Mortgage rates climbed further past 7% in the week ended April 25, according to the latest data from Freddie Mac.
The 30-year-fixed rate mortgage averaged 7.17%, up from 7.10% the previous week and 6.43% the comparable week this time last year, the mortgage giant said Thursday. The 15-year-fixed-rate mortgage climbed to 6.44%. That’s higher than last week when it stood at 6.39% and a year ago when it was 5.71%.
The increase was largely expected and marks the second consecutive week the 30-year-fixed rate has hovered above the 7% threshold. Economists expect that rates will stay elevated as the Federal Reserve pushes back its timeline to cut the federal funds rate that directly affects mortgage rates. Further rate growth at a fast pace could eventually edge some buyers out of the house market, forcing them to instead opt to rent. That, in turn, could benefit apartment developers and owners by placing greater demand on an already crowded rental market.
“The inflation trend hasn’t been favorable in recent months, and the prospect of ‘higher for longer’ rates is becoming embedded in financial markets,” Greg McBride, chief financial analyst at Bankrate, said in a survey from the personal finance website last week.
The rise in rates has taken some of the momentum out of the mortgage market, causing a 2.7% week-over-week decline in mortgage applications the week ended April 19, according to the latest data from the Mortgage Bankers Association.
“Purchase applications declined, as home buyers delayed their purchase decisions due to strained affordability and low supply,” Joel Kan, the group’s vice president and chief deputy economist, said in a statement.
But lofty rates aren’t fully extinguishing buyer demand. Sales of newly built single-family homes blew past expectations in March, reaching their highest rate in six months and posting their largest monthly increase in over a year. Pending existing homes sales — a measure that accounts for contracts signed for the sale of existing single-family houses, condos and co-ops — also grew in March.
“Purchase demand remains steady. With rates staying higher for longer, many homebuyers are adjusting,” Sam Khater, Freddie Mac’s chief economist, said in a statement.