Although they are rising, mortgage rates remain below 3%. But a rise in house prices threatens to make buying a home unreachable for many Americans.
The 30-year fixed-rate mortgage averaged 2.99% for the week ending August 20, and increased three basis points the week before, Freddie Mac FMCC,
reported Thursday. It was the second consecutive week in which rates increased.
Meanwhile, the 15-year fixed-rate mortgage jumped eight basis points to an average of 2.46%. The 5-year Treasury-indexed hybrid adjustable rate mortgage has increased by a single basis point to 2.91% on average.
A few factors drove mortgage rates higher. “The rates are advanced because the U.S. Treasury issued a large number of notes and investors are seeing hopeful updates on COVID fax tests,” said George Ratiu, senior economist at Realtor.com.
Mortgage rates roughly follow the direction of yields on the 10-year Treasury note, which has remained at its highest level in recent weeks since early July.
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But another factor that contributed to the rise in interest rates was the surprise announcement last week that Fannie Mae and Freddie Mac were imposing a new “adverse market” cost on mortgage financing, a move that drew criticism from trading groups. advocates for consumers and legislators on both sides of the aisle.
“The announcement by the [Federal Housing Finance Agency] Paying a 0.5% fee on all mortgage financing loans was one that kept lenders from lending, putting many in a difficult financial position and forcing them to raise rates across the board – even for purchase loans. , which are not directly affected by the policy – to cover their losses, “said Matthew Speakman, an economist at Zillow ZG,
. The fee has functionally raised the baseline for mortgage rates, Speakman said.
The rise in rates comes as competition between buyers in the housing market continues to increase extremely. And that pushes house prices even higher, given the short supply of houses.
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Median prices rose 10.1% year-on-year for the week ending August 15, according to a new Realtor.com report. It represents the fastest growth in list prices since January 2018.
(Realtor.com is operated by News Corp NWSA,
subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
“With supply and demand moving in opposite directions, sellers are clearly gaining the upper hand in the market as buyer competition builds and prices win to go up in the fall,” said Javier Vivas, director of economic research for Realtor. com, in the report.
Rising interest rates can cool the housing market a bit if they ask some buyers to buy new from a home. But for those buyers who stay in the market, higher rates will make buying a home even more expensive.
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