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30-Yr Fixed Mortgage Rates Are Now At A Stunning 5.02%
According to Mortgage News Daily, the 30-year fixed mortgage rate is now at a stunning 5.02%. This is 1.64% higher than the 3.38% rate homeowners enjoyed last year.
This is also the first time 30-year mortgage rates crossed the 5% threshold, except for two days in 2018.
RELATED: Mortgage Applications Down By 10% As Interest Rates Go Up
Fixed Mortgage Rates Rise to Over 5%
Mortgage rates usually follow the yield on the US 10-year Treasury. Due to the Federal Reserve’s policies of curbing inflation, which meant raising interest rates, treasury yield rates are climbing. The Russia-Ukraine war is also creating havoc on the global marketplace.
Bonds, which usually fall when interest rates rise, are already getting a beatdown earlier today.
However, Federal Reserve Vice Chair Lael Brainard said that the agency’s balance sheet reduction rate will accelerate further.
This further sent investors shying from bonds, according to Matthew Graham, CEO of Mortgage News Daily.
He called Brainard’s blunt assessment” unsettling” especially since the latest Fed meeting minutes will be out soon. Traders are now taking her comments as a sign of muted bond-buying in the minutes.
Homebuyers Face Higher Prices For Already Expensive Homes
Today’s homebuyers, who thought the housing market was expensive last year, the new fixed mortgage rates will shock them more.
Americans are already living in an era marked by the most expensive housing market in the US recorded history.
In fact, February prices for new homes are now 20% higher compared to a year ago. This represented the 12th consecutive month of year-on-year increases for houses.
As a result, even more, prospective homebuyers will face more stumbling blocks. Even higher house prices are eliminating some buyers from the equation.
Previously, the supply chain crisis involving housing materials and supplies added considerably to the final price tags of new homes. Now, higher interest rates will surely impair the ability of some to afford monthly payments.
Higher Variable and Fixed Mortgage Rates Can Lead to a Drop in Demand
Eventually, the factors can cause a drop in demand for housing. Consequently, housing companies will slow down production, and lumber prices will fall.
ING's chief international economist James Knightley noted the factors. The market will swing from “one of significant excess demand” to “one where we are in better balance.”
Consequently, the drop in demand can address the tight supply of available homes. It can also help bring down prices back to 2019 levels.
An extra supply of houses can also help slow down the spiraling cost of the rent. All in all, this can help the Federal Reserve achieve its objective of taming inflation and slowing the economy.
Home Sales Drop In February
Even the mere thought of rising interest rates already impacted home sales. Economists estimated that due to previous January demand, home sales will hit 810,000.
Last February however, home sales fell by 6% year-over-year to 772,000. The only question remaining is if can anybody ever afford to buy homes in this economy?
Watch the CNBC Television News video reporting that the 30-year fixed mortgage rate climbs above 5%:
Loading ...What do you think of rising fixed mortgage rates, which already surpassed 5%? Will this discourage most homebuyers to abandon their plans to buy new homes? Or, will some Americans still buy a bullet and still buy their own house?
Let us know what you think. Share your thoughts in the comments section below.
