The average 30-year fixed-rate mortgage rose 12 basis points from the prior week to 3.69%, according to Freddie Mac’s latest Primary Mortgage Market Survey.
“Despite this week’s uptick in mortgage rates, the housing market remains on the upswing with improvement in construction and home sales,” said Sam Khater, Freddie Mac’s Chief Economist. “While there has been a material weakness in manufacturing and consistent trade uncertainty, other economic trends like employment and homebuilder sentiment are encouraging.”
A year, the 30-year fixed-rate mortgage was 4.85%, and was 3.57% last week. The 15-year fixed-rate mortgage also increased, reporting a rise of 0.5 points to 3.15%—a steep decline from last year’s 4.26%.
George Ratiu, Senior Economist for realtor.com, said bond yields rose as investors “digested the week’s mixed signals” of a downgrade of global economic growth, a potential Brexit agreement, and a possible end to the U.S.-China trade war.
Consumers, he said, are still benefiting as the average borrowers is saving around $1,200 annually on their mortgage payments.
“For home buyers, the higher purchasing power is stymied by shrinking inventory and rising prices. First-time buyers have also been burdened by a heavy student debt load, which has dampened their ability to save for a down payment,” Ratiu said. “With average loan debts which exceed typical down payments in many markets, young homebuyers are broadening their search to mid-sized and smaller markets, searching for improved affordability, along with quality of life.”
Black Knight’s September Mortgage Monitor Report found that it required 20.7% of the national median income to make a monthly mortgage payment—the second lowest payment-to-income ratio in 20 months.
According to the report, the $1,122 in monthly P&I required to purchase an average-priced home is 10% lower than in November when interest rates closed in on 5%. Home prices, however, have risen more than 4% since that point.
Affordability was at a nine-year low in November when the payment-to-income ratio increased to 23.7%, causing an extended slowdown in home price growth. Falling rates over the past few months have boosted buying power by 16% ($46,000), while not impacting the P&I payments.