Mortgage Rates Rise Again!

Mortgage Rates Rise Again!

Affordability Concerns for Buyers 

Mortgage rate soars closer to 5% in its second huge jump last week. These interest rate increases couldn't come at a worse time when the awaited spring housing market gets underway. Potential buyers are already facing historically low inventory and already high prices continuing to rise. The combination of rates and price escalation has driven the national median mortgage payment to more than 20% higher than it was a year ago.

As if all of this was not enough, homebuyers are also facing inflation on everything else in their budgets, which make worse the affordability issues. Rents are also rising higher at a record rate, making it more difficult for potential buyers to put aside money for a down payment. In addition, as rates rise, some buyers will no longer qualify for a mortgage. Lenders have tightened their loan qualification standards including permitted ‘Debt to Income Ratio.’

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Three key points about this evolving market:

• The average rate of a 30-year fixed mortgage increased materially higher Friday, rising 24 basis points to 4.95%, according to Mortgage News Daily. Recall that one basis point is equal to 0.01%, or 0.0001. This means that one hundred basis points equal 1% or 24 basis points is a 0.24% rate increase.

• The quickness in the rise in rates has reduced demand for mortgages and refinancing loans.

• With both rates and prices considerably higher, the median mortgage payment is now more than 20% higher than it was a year ago.

The average rate for the most common mortgage, the 30-year fixed mortgage, shot significantly higher Friday, rising 24 basis points to 4.95%, according to Mortgage News Daily. It is now at 164 basis points, or 1.64% higher than it was one year ago. 

On Tuesday, March 29, the rate had hit 4.72%, a 26-basis-point, or more than a quarter point jump from March 18. The quicker-than-expected rise in rates has weighed down the demand for mortgages and refinancing loans.

Economists are once again revising their projections for interest rates and home price increases for 2022 as most of those benchmarks have been already passed by now. Their sales figures are being lowered for the year as interest rates and prices rise. 

Lawrence Yun, Chief Economist for the National Association of Realtors®, said Tuesday, March 29, that he expects the rate to hover around 4.5% this year, after previously predicting it would stay at 4%. Of course, the current interest rate on a 30-year conventional mortgage is already above 4.5% so interest rates continue to surpass the predictions as quickly as they are revised.

NAR's latest official prediction is for sales to drop 3% in 2022, but Yun now says he expects they will fall 6% to 8%. NAR has not officially updated its forecast.

Bottomline: This is becoming a market that most Realtors are not used to and why, whether a buyer or seller, hiring an experienced Realtor who has navigated markets like this, such as the mid-80’s, late 90’s and 2008-9 and 2013. Realtors that have successfully guided their clients through such turmoil is vitally important to ensuring that get the most out of your homebuying transaction.

For a No Obligation consultation with a Realtor with 4 decades of experience in the D/FW real estate market call Gen Manning at 469-556-1185.