Mortgage rates inched closer to 6% this week. The 30-year fixed-rate mortgage averaged 5.81%, up modestly from 5.78% last week, according to Freddie Mac. Borrowing costs are mounting higher and higher for potential home buyers, who now find themselves squeezed both financially and by low inventory.
“Since the beginning of the year, home buying has cost about $800 more every month,” Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, writes on the Economists’ Outlook blog. “These higher mortgage rates hurt affordability, and middle-income home buyers can afford to buy fewer homes. Even though inventory has increased 13% since January, not all home buyers can afford to buy these additional homes. In fact, in order to be able to afford those homes, it appears that buyers need to earn more than $150,000 per year.”
Still, rising rates are tamping down previously frenzied demand, which may be a positive thing for the market. “The combination of rising rates and high home prices is the likely driver of recent declines in existing-home sales,” says Sam Khater, Freddie Mac’s chief economist. “However, in reality, many potential home buyers are still interested in purchasing a home, keeping the market competitive but leveling off the last two years of red-hot activity.”
Freddie Mac reports the following national averages for mortgage rates for the week ending June 23:
- 30-year fixed-rate mortgages: averaged 5.81% with an average 0.8 point, up from last week’s 5.78%. A year ago, the 30-year fixed-rate mortgage averaged 3.02%.
- 15-year fixed-rate mortgages: averaged 4.92% with an average 0.9 point, up from last week’s 4.81%. A year ago, the 15-year fixed-rate mortgage averaged 2.34%.
- 5-year hybrid adjustable-rate mortgages: averaged 4.41% with an average 0.3 point, up from last week’s 4.33%. A year ago, the five-year ARM averaged 2.53%.