Freddie Mac’s weekly Primary Mortgage Market Survey report, released Thursday, shows that as the housing market adjusts to rapidly tightening monetary policy, mortgage rates were on the rise again.
“The housing market is the most interest-rate sensitive segment of the economy, and the impact rates have on buyers continues to evolve,” said Sam Khater, Freddie Mac’s chief economist. “Home sales have declined significantly and, as we approach year-end, they are not expected to improve.”
According to the report:
- The 30-year fixed-rate mortgage averaged 7.08% with an average 0.9 point as of Nov. 10, up from last week when it averaged 6.95%. A year ago at this time, the 30-year FRM averaged 2.98%.
- The 15-year fixed-rate mortgage averaged 6.38% with an average 1 point, up from last week when it averaged 6.29%. A year ago at this time, the 15-year FRM averaged %.
- The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.06% with an average 0.2 point, down from last week when it averaged 5.95%. A year ago at this time, the 5-year ARM averaged 2.53%.
Realtor.com Chief Economist Danielle Hale said Thursday’s closely watched inflation data is important not only because it helps measure the pressure that household budgets are up against, but also because it is the most impactful indicator for mortgage rates at this stage.
“Today’s consumer price index (CPI) reading showed that inflation remains high despite some slowing in October," Hale said. "Overall year-over-year price gains rose 7.7% with budget essentials like food, energy, and transportation services climbing at a double-digit pace. Core CPI, a measure that excludes volatile food and energy prices rose 6.3% from a year ago, also a step down from last month’s pace.”
Hale added that while October wages were up 4.7% from a year ago, October inflation data suggests that those paychecks were able to buy much less.
“Due to scheduling quirks, this CPI data is one of two sets that the Fed will have to consider before their next rate decision, which will be announced December 14,” she said. “Today’s reading was a step in the right direction, and if this momentum continues, it may mean that the Fed will hike by only an additional 50 basis points in December.”
Hale said that, at a time when mortgage rates are up nearly 400 basis points from a year ago — with roughly half of that increase coming in the last 14 weeks — home shoppers are reevaluating their options, which have changed dramatically.
“The monthly mortgage cost of buying a typical for-sale home at today’s rate with a 10% down payment is up more than $1,000 compared to last year," she said, "and up more than $470 from early August, when rates briefly dipped below 5% (4.99%). Recent survey data show that just 16% of respondents said it was a good time to buy a home.”
Still, Hale said, this week’s mortgage application data ticked up slightly, highlighting that even when it’s not a good time to buy, there are still home shoppers in the market for a variety of reasons.
“The key to making a good decision in this challenging housing market is to be laser focused on what you need now and in the years ahead, so that you can stay in your home long enough that buying is a sound financial decision,” she said. “Another key point is to avoid stretching your budget, as tempting as it may be given diminished purchasing power.”
Zillow Home Loans Senior Economist Matthew Speakman said mortgage rates were holding firm near 20-year highs after an eventful seven days filled with key monetary policy, economic and political updates.
“After rising strongly in response to comments from the Federal Reserve indicating that more rate hikes and policy tightening were likely in the coming months, mortgage rates had a muted reaction to the October jobs figures, which showcased a resilient, but softening labor market,” Speakman said. “Rates had a similarly mild response to the midterm election results, although some of the races remain too close to call and still possess the ability to affect market sentiment, depending on the results.”
The survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
