Freddie Mac has released the results of its Primary Mortgage Market Survey (PMMS) for the week ending October 14, which found the 30-year fixed-rate mortgage (FRM) averaging 3.05%, with an average 0.7 point, up from last week when it averaged 2.99%.
A year ago at this time, the 30-year FRM averaged 2.81%.
“The 30-year fixed-rate mortgage rose to its highest point since April,” said Sam Khater, Freddie Mac’s Chief Economist. “As inflationary pressure builds due to the ongoing pandemic and tightening monetary policy, we expect rates to continue a modest upswing.”
Also this week, the 15-year FRM averaged 2.30% with an average 0.7 point, up from last week when it averaged 2.23%. A year ago at this time, the 15-year FRM averaged 2.35%. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.55% with an average 0.2 point, up from last week when it averaged 2.52%. A year ago at this time, the five-year ARM averaged 2.90%.
“Historically speaking, rates are still low, but many potential homebuyers are staying on the sidelines due to high home price growth,” said Khater. “Rising mortgage rates, combined with growing home prices, make affordability more challenging for potential homebuyers.”
And while housing affordability is showing slight signs of improvement, it remains a major hurdle for many. According to the latest Housing Affordability Index from the National Association of Realtors (NAR), affordability improved in August, with the monthly mortgage payment falling by 1.1%, while the median family income fell modestly by 0.7%, compared to July 2021’s totals.
“The record growth in home prices over the past year driven by short supply has made homeownership less affordable for many Americans, especially for would-be first-time homebuyers and those searching for homes under $200,000,” said Jeremy Sicklick, Co-Founder and CEO of HouseCanary. “It’s also worth noting that mortgage rates have increased recently, topping 3% for the first time since early July. Higher borrowing rates, in tandem with lofty prices, could potentially limit the demand for new homes and refinances.”
The Mortgage Bankers Association (MBA) reported that mortgage applications increased 0.2% this week over the previous week, as rates while slightly on the rise, remain in refi-friendly territory. The refinance share of mortgage activity decreased slightly to 63.9% of total applications, from 64.5% the previous week.
"Mortgage rates reached their highest level since June 2021, but application activity changed little this week. An increase in home purchase applications offset a slight decline in refinances," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "The increase in purchase applications was welcome news, but was primarily driven by a 2% gain in conventional purchase applications, which kept the average loan size elevated."
A promising sign came from the U.S. Department of Labor, who reported that for the week ending October 9, the advance figure for seasonally-adjusted initial unemployment claims fell to 293,000, a decrease of 36,000 from the previous week's revised level, marking the lowest level for initial claims since March 14, 2020 when it was 256,000.
"For real estate markets, financing costs remain favorable, offering first-time buyers a strong incentive to keep looking," said Realtor.com Manager of Economic Research George Ratiu. "Halfway through October, the number of homes for sale has improved compared to the overheated first half of this year, leading to slower price growth. It seems that buyers and sellers are finally taking a step back from the pandemic-induced stampede of the past year to regain their footing and reassess their next steps. Today’s buyers should evaluate the impact that spending an extra $125 a month on a median home mortgage will have on their monthly budgets and longer-term finances.”