Mortgage rates rise again, disrupting the housing market

Rates on the 30-year mortgage continued to climb last week after the latest inflation reading, Freddie Mac said. (iStock)

Rates on the 30-year mortgage crossed the 6% mark for the first time in 14 years last week as worse-than-expected inflation indicators hit the market, Freddie Mac said.

The average rate on a 30-year fixed-rate mortgage rose to 6.02% for the week ending September 15, according to Freddie Mac’s Core Mortgage Market Survey. This is an increase of The week before while it averaged 5.89% and is significantly higher than at the same time last year, when it was 2.87%.

Other loan terms also increased this week. The 15-year mortgage rose to 5.21% from 5.16% the previous week and from 2.18% last year. The five-year Treasury-indexed hybrid variable-rate mortgage (ARM) also rose to 4.93%, from 4.64% the previous week and from 2.43% last year.

“Mortgage rates have continued to rise alongside stronger-than-expected inflation numbers this week, topping 6% for the first time since late 2008,” said Sam Khater, chief economist at Freddie Mac. “While rising rates will continue to dampen demand and put downward pressure on home prices, inventory remains insufficient. This indicates that while the decline in home prices is likely to continue, it will not shouldn’t be important.”

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Rates rise in response to high inflation

August inflation figures showed consumers are still facing high prices despite the Fed’s efforts to bring inflation down.

The consumer price index (CPI), a measure of inflation, rose 8.3% annually in August, according to the Bureau of Labor Statistics. That was down from 8.5% in July and a four-decade high of 9.1% in June.

“While the headline figure has slowed from the June peak, core inflation remains stubbornly elevated, putting pressure on the Federal Reserve to maintain an aggressive stance on monetary tightening,” said George Raitu. , head of economic research at real estate agent.comsaid.

The Federal Reserve raised interest rates to curb high inflation. He approved back-to-back 75 basis point interest rate hikes in June and July. It is expected to raise rates again at its September meeting to as much as 75 basis points or even 100 basis points, Raitu said.

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Sellers lower home prices to attract buyers

Higher borrowing rates mean someone buying a home at the median price would currently face a monthly payment of $2,100, a 66% jump from last year, according to

“With real median household income remaining relatively unchanged, many first-time homebuyers find the door to homeownership closed for this season,” Raitu said. “With borrowing costs expected to continue to rise over the coming months, it is becoming increasingly clear that house prices need to come down to restore balance to housing markets.”

Raitu said many sellers reacted to this change in market conditions by reducing their asking prices. Experts anticipate lower house prices, reviving a more balanced market vis-à-vis buyers.

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