Home buyers are facing the highest mortgage rates in 22 years. They’re also up against higher home prices and limited inventory. Add to that this week’s 7.23% average mortgage rate for the 30-year fixed-rate loan, which translates to an average monthly mortgage payment of $2,246 for a typical existing single-family home, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®.
“Until rates come down, this will hurt buyers’ opportunities to enter the market and the willingness of sellers to make a needed move,” Lautz says.
Indicators show an improving economy likely will “continue to keep upward pressure on rates in the short term,” says Sam Khater, Freddie Mac’s chief economist. “As rates remain high and supply of unsold homes woefully low, incoming data shows that existing-home sales continue to fall,” he adds. “However, there are slightly more new homes available, and sales of these new homes continue to rise, helping provide modest relief to the unyielding housing inventory predicament.”
But home buyers may have to recalculate what they can afford now that rates are well into the 7% range. More home shoppers are being drawn to adjustable-rate mortgages, which tend to have a lower introductory interest rate. But rates for ARMs will reset in five or seven years. The share of mortgage applications for ARMs last week rose to 7.6%, the highest level in five months, the Mortgage Bankers Association reported Wednesday.
“Some home buyers are looking to lower their monthly payments by accepting some interest rate risk after the initial fixed period,” says Joel Kan, the MBA’s economist.
Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 24:
- 30-year fixed-rate mortgages: averaged 7.23%, rising from last week’s 7.09% average. A year ago, 30-year rates averaged 5.55%.
- 15-year fixed-rate mortgages: averaged 6.55%, increasing from last week’s 6.46% average. Last year at this time, 15-year rates averaged 4.85%.