Mortgage Rates Surge Above 7%, Housing Market Remains Tight

Rates have been steadily increasing for the past two weeks, currently sitting above 7%. According to Freddie Mac’s report this week, the average rate for a 30-year mortgage is now at 7.17%, up from last week’s figure of 7.1%. A year ago, rates were slightly lower but not significantly so, with an average interest rate on 30-year mortgages standing at 6.43%. This significant hike has prompted Freddie Mac Chief Economist Sam Khater to state that “mortgage rates continued rising this week”.
Despite the recent spike in mortgage costs over the last month and a half, there doesn’t seem to have been much impact on house purchasing activity. The fact remains unchanged from prior weeks that while purchase demand stays stable amidst increasing prices for home loans, more potential buyers are making necessary adjustments as rates continue their upward trend.
The situation with 15-year fixed rate mortgages is not too different either; the average interest rate this week was recorded at 6.44%, an increase from last week’s figure of 6.39%. Interestingly, a year ago these types of loans had lower rates than they do now – averaging out to be around 5.71% in March 2022.
Housing prices have not yet recovered since their peak during the pandemic era; from February 2020 until today, average sale price has risen by a whopping 27.5%. However, there are signs that home values may be starting to cool down slightly – Zillow predicts an annual growth rate of just 1.9% for this year compared with the faster rates seen in previous years. Nevertheless, it is expected that sales will also see a slight decrease this year, due primarily to climbing mortgage interest rates which have prompted forecasting by real estate analysts such as Zillow who predict around 4.06 million existing homes selling during 2024 – down slightly from the previous figure of 4.09 million sales in 2023.
The limited number of listings is also contributing to predictions for lower home sale volumes, with new housing stock seeing a sharp uptick of only around four percent last month following a drop as low as just two percent during March – signalling that the market remains tight and challenging for prospective buyers out there trying to snap up some desirable property deals.
There has also been widespread concern regarding increasing insurance costs in certain areas, particularly California, Texas, Florida, Iowa, among others where climate change-induced events such as severe storms have led insurers to cancel or sharply hike policy coverage across multiple locations at alarmingly frequent rates throughout recent times. While it remains clear that more stringent environmental legislation will need implementing before long if society wishes for meaningful improvements on the damage already caused, individuals with an impending desire of obtaining comprehensive home insurance should take advantage of websites such as Credible which enable easy comparison between a wide range of providers and interest rates in just minutes.
If you’re thinking about purchasing your first house or refinancing your current mortgage deal, it might be worth checking out what other borrowers have to say about the market through visiting crediblemoneyexpert@credible.com – where questions related to personal finance can also be submitted for potential publication in future articles by Credible’s Money Expert columnist.