In a recent development, mortgage rates have surged past 8%, driven by a Treasury yield exceeding 4.9% for the first time since 2007. Mortgage rates, as reported by Mortgage News Daily, reached 8.03% this week, up from 7.69% the previous week. Meanwhile, HousingWire’s Mortgage Rates Center indicated that Optimal Blue’s average 30-year fixed rate for conventional loans stood at 7.78% on Wednesday, compared to 7.52% the prior week.
These numbers outpaced Freddie Mac’s Primary Mortgage Market Survey, which noted a 30-year fixed-rate mortgage at 7.63% as of October 19, a 6 basis point increase from the previous week. This surge in rates, compared to 6.94% a year ago, is adversely affecting housing affordability.
Freddie Mac’s chief economist, Sam Khater, emphasized the need for borrowers to shop around for competitive mortgage rates, especially given that down payment requirements pose a significant obstacle for first-time homebuyers. Additionally, he pointed out that rising rates are impacting homebuilders, leading to a potential downturn in construction activity.
Builder confidence has also dipped to 40, its lowest point since January 2023, according to the National Association of Home Builders/Wells Fargo Housing Market Index. However, the Mortgage Bankers Association expects rates to stabilize and decrease over the next quarter. While high mortgage rates, limited housing inventory, and affordability challenges have dampened mortgage application activity, there is hope for some relief in 2024.
Nonetheless, the housing market continues to grapple with a significant inventory problem. Despite recent increases, existing home sales remain substantially lower than the previous year, with many homeowners hesitant to list their properties due to the persistently high borrowing costs associated with mortgage rates near a 20-year high.