Mortgage rates approach 7% following U.S. rating downgrade
Freddie Mac put the average 30-year fixed-rate mortgage at 6.9% this week, just below the peak seen in mid-July.
Key points:
- While the weekly survey was just shy of 7%, a daily survey on Aug. 3 posted an average rate of 7.2%.
- Along with the U.S. debt rating downgrade, upbeat economic news continues to push rates higher.
- It’s bad news for buyers wanting to enter the late-summer market, but economists expect rates to ease in the fall and winter months.
Mortgage interest rates moved closer to 7% this week, all but ensuring the trend of low inventory and slow sales will remain in place as the summer season starts winding down.
The weekly survey by Freddie Mac put the average 30-year fixed-rate mortgage at 6.9%, up from 6.81% a week ago. The daily survey from Mortgage News Daily reported an average of 7.2% on Aug. 3, which could indicate that rates will continue their upward trajectory.
The 15-year fixed rate mortgage was also up significantly this week, hitting 6.25%.
The combination of upbeat economic data and the U.S. government rating downgrade by Fitch Ratings earlier this week have contributed to the rise in mortgage rates, said Sam Khater, Freddie Mac's chief economist.
Mortgage rates are now expected to remain elevated for the next couple of months, keeping pressure on affordability, said George Ratiu, chief economist at Keeping Current Matters.
"For buyers who are not in a hurry, the fall and winter months could bring better values and a less competitive environment to find the right home," Ratiu said.
Jessica Lautz, deputy chief economist at the National Association of Realtors, agreed, noting that the rate increase has pushed the median monthly mortgage payment to $2,192 for the typical existing single-family home.
"In the short term, this is bad news for consumers looking to enter the late summer housing market. However, in the coming months, with inflation easing, one hopes the Fed will stop rate increases… which will lower mortgage interest rates in the fall and winter months," Lautz said.
A recent decline in mortgage applications suggests that prospective buyers are holding out for lower rates. Applications for home purchase loans were down 3% this week on a seasonally adjusted basis, according to the Mortgage Bankers Association, and down 26% compared to a year ago.
Sellers are also waiting to make a move, as active inventory fell compared to the previous year each week in July, said Hannah Jones, economic data analyst at Realtor.com.
"The drop in for-sale inventory was met with the typical seasonal pick-up in buyer demand, despite affordability constraints, which propped up home prices," Jones said.