Freddie Mac released its latest Primary Mortgage Market Survey (PMMS), which showed a notable uptick, as the 30-year fixed-rate mortgage (FRM) averaged 3.69%. This upward climb reignites flat movement over three weeks prior.
Key findings:
- The 30-year fixed-rate mortgage averaged 3.69%, with an average of 0.8 points for the week ending February 10, 2022, up from last week when it averaged 3.55%. A year ago, the 30-year FRM averaged 2.73%.
- The 15-year fixed-rate mortgage averaged 2.93% with an average of 0.8 points, up from last week when it averaged 2.7%. A year ago, the 15-year FRM averaged 2.19%.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80%, with an average of 0.3 points, up from last week when it averaged 2.71%. A year ago, the 5-year ARM averaged 2.79%.
The takeaway:
“The normalization of the economy continues as mortgage rates jumped to the highest level since the emergence of the pandemic,” said Sam Khater, Freddie Mac’s chief economist. “Rate increases are expected to continue due to a strong labor market and high inflation, which likely will harm homebuyer demand.”
“The Freddie Mac fixed rate for a 30-year loan resumed its upward momentum this week after a three-week hiatus, said the realtor.com® manager of economic research, George Ratiu. Rates increased along with the surge in the 10-year Treasury, which passed 1.9% this week, the highest point since November 2019, before the pandemic. The stronger-than-expected employment report for January and rising inflation keep investors bullish on the economy and the expected rate hikes from the Federal Reserve in the first half of the year. With rising rates, mortgage applications to purchase a home declined last week, as many first-time buyers were priced out of the market.
Real estate markets are caught in a lopsided dynamic with many buyers eager to find the right home before rates rise even higher, but very few available homes for sale as a result of almost a decade and a half of underbuilding. Based on realtor.com®’s latest research, the shortage of new homes accelerated in 2021, passing 5.8 million at the end of the year. With millennials and Gen Z forming households at faster rates, new home construction would have to triple the rate of home completions to close the gap in 5-6 years. For now, many buyers are facing prices still rising at more than 10% over last year. In addition, they are paying $250 more on their monthly mortgage payment at the current rate. The benefits that ultra-low interest rates provided in the previous two years are wearing off, and affordability is becoming a huge hurdle for many buyers.”