The average rates for fixed mortgages continued their upward climb this week, accompanied by a marked rise in demand for adjustable loans as consumers seek relief from record-high monthly payments.
Freddie Mac's latest Primary Mortgage Market Survey released Thursday shows that the average rate for the benchmark 30-year fixed-rate mortgage hit 7.57% this week, up from 7.49% last week and 6.92% a year ago.
The rate for a 15-year fixed mortgage also rose, averaging 6.89% after coming in last week at 6.78%. One year ago, the rate on a 15-year fixed note averaged 6.09%.
"For the fifth consecutive week, mortgage rates rose as ongoing market and geopolitical uncertainty continue to increase," said Sam Khater, Freddie Mac’s Chief Economist. "The good news is that the economy and incomes continue to grow at a solid pace, but the housing market remains fraught with significant affordability constraints. As a result, purchase demand remains at a three-decade low."
Of those who are in the market to buy a home right now, there has been a surge in consumers opting for mortgages with adjustable rate mortgages (ARMs), which tend to start with a lower rate but can rise over the life of loan.
"Mortgage applications increased for the first time in three weeks, pushed higher by a 15 percent jump in ARM applications," Mortgage Bankers Association President Bob Broeksmit said in a statement accompanying the MBA's latest weekly survey results. "With mortgage rates well above 7 percent, some prospective homebuyers are turning to ARMs to lower their monthly payment in the short term amidst these high mortgage rates."
The average contract interest rate for a 5/1 ARM, a loan with a rate that is fixed for five years and can adjust once annually thereafter, fell to 6.33% this week, down from 6.49% from last week, according to the MBA's data.
HOUSING INVENTORY REMAINS PAINFULLY LOW AS SHORTAGE PERSISTS
Housing affordability in the U.S. reached an all-time low over the summer, and has continued to get worse as mortgage rates rise and home prices remain high due to a lack of homes for sale as more homeowners who are locked in a lower interest rates stay put rather than sell.
As more would-be buyers continue to be priced out of today's expensive market, many are holding off on making a purchase until they can afford to do so.
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A recent survey from Realtor.com found that nearly a third of respondents said they have moved in with their parents or other family members in order to save up the funds to buy a home, while others are choosing to continue to rent. The median rent for a home with two bedrooms or fewer has fallen on an annual basis for four consecutive months, Realtor.com reported.
Still, asking rents in the U.S. remain near record highs.
