Mortgage rates are rising at the fastest rate in three decades as interest rates begin to rise.
According to government-backed mortgage company Freddie Mac, 30-year fixed-rate mortgages are now averaging 4.72% — a sharp increase from 3.13% a year ago.
“Mortgage rates have risen 1.5 percentage points in just the last three months, the fastest three-month increase since May 1994,” said Sam Khater, Freddie Mac’s chief economist, in a press release. “The rise in mortgage rates has softened buying activity, so monthly payments for those looking to buy a home are up at least 20 percent year-on-year.”
Freddie Mac also revealed that the 15-year fixed-rate mortgage averages 3.83%, up from 2.42% a year ago.
Meanwhile, CNBC real estate correspondent Diana Olick wrote that overall mortgage application volume is plummeting — down 41% year-over-year. “Rising interest rates are crushing the mortgage market,” she explained, “as few homeowners are now able to benefit from refinancing and more potential homebuyers are being priced out.”
“Mortgage application volume continues to fall on the back of rapidly rising mortgage rates as financial markets anticipate significantly tighter monetary policy in the coming months,” economist Joel Kan told CNBC. “As higher interest rates reduce the incentive to refinance, the application volume has fallen to its lowest level since spring 2019.”
In fact, the Federal Reserve recently voted to raise interest rates by 0.25% — the first such move since 2018 and likely the first of many rate hikes this year. During the 2020 recession, near-zero central bank interest rates stimulated spending and borrowing – and therefore contributed to exceptional demand for real estate.
As The Daily Wire’s Cabot Phillips explained on a recent episode of Morning Wire, the Federal Reserve is now warning of a housing bubble.
Asked why housing costs are soaring, Phillips cited inflation – currently at an 8% annual rate – rising costs for wood and fuel and the ongoing fallout from COVID-19. “During the pandemic, new construction projects have been halted across the board and that means the number of homes for sale is now much lower than usual. It’s just supply and demand,” he explained. “And unfortunately, on that front, it will likely be years before new housing construction can meet demand again.”
“Some real estate experts are saying that rising mortgage rates should cool the market down a bit,” Phillips commented. “Remember, mortgage rates have fallen about 2% during the pandemic, allowing many people to easily afford homes that would have been out of their price range a few years earlier when rates were higher.”
Some experts believe that “until the supply of homes meets the overwhelming demand that we’re seeing, prices will continue to rise,” Phillips noted.
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