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Mortgage rates have moved up for the third week in a row, with the average rate for a 30-year, fixed-rate mortgage now approaching 7%, according to the latest survey from Freddie Mac.
The survey shows:
“There is no doubt continued high rates will prolong affordability challenges longer than expected, particularly with home prices on the rise again,” Sam Khater, Freddie Mac’s chief economist, said in a news release. “However, upward pressure on rates is the product of a resilient economy with low unemployment and strong wage growth, which historically has kept purchase demand solid.”
Figures for the survey come from conventional mortgage applications sent to lenders across the U.S. and then submitted to Freddie Mac. The company buys mortgages and packages them as mortgage-backed securities.
Mortgage Originations Sank in First Quarter, Says TransUnion
New figures from the TransUnion credit bureau show the dramatic impact that high interest rates have had on mortgage activity.
Mortgage originations fell to a record low of 899,000 in the first quarter of 2023, down 59% from a year earlier, according to a TransUnion report released Thursday. This represents the second largest annual drop on record.
The number of mortgage originations for home purchases fell 40% during the one-year period, says the report, while the number of mortgage originations for refinancing plummeted 86%.
“Mortgage rates higher than those in recent history continue to lend pause to potential borrowers, resulting in historically low mortgage originations. Demand for refinance continues to be the hardest hit by these elevated rates,” said Joe Mellman, senior vice president and mortgage business leader at TransUnion.
“Given that the large majority of existing mortgages have rates below 6%, there is no incentive for homeowners to refinance their existing lower-than-current-rates mortgage and enter into a new, costlier mortgage,” Mellman added in a statement.
Inflation Rate Creeps Up
Whether mortgage rates heat up or cool off depends in part on the U.S. inflation rate.
The U.S. Bureau of Labor Statistics (BLS) reported Thursday that the inflation rate rose to 3.2% in July, up from 3% the previous month. The Federal Reserve targets an inflation rate of 2%, adjusting its benchmark interest rate up or down to help reach that goal. When the benchmark rate, known as the federal funds rate, increases or decreases, mortgage rates tend to follow suit.
In determining the benchmark interest rate, the Fed’s rate-setting committee closely watches what’s known as the core inflation rate. This rate excludes highly volatile prices for food and energy. In July, the core inflation rate declined to 4.7%, down slightly from 4.8% the previous month, says the BLS.
On July 26, the Fed’s rate-setting committee bumped up its benchmark rate to a range of 5.25% to 5.50%. Fed Chairman Jerome Powell says another rate hike is possible in September.
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