Freddie Mac’s 30-year mortgage rate climbs to 5.78%

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Mortgage rates are back on the rise this week. The average interest rate on a 30-year fixed-rate mortgage jumped to 5.78% for the week ending June 16, according to Freddie Mac.

“Mortgage rates jumped as the 30-year fixed-rate mortgage rose more than half a percentage point, marking the largest one-week increase in our survey since 1987,” said Sam Khater, chief economist at Freddie Mac, in a statement. “These higher rates are the result of a change in expectations regarding inflation and the course of monetary policy.”

Rising rates will further strain affordability. Even before today’s move, the average new monthly mortgage payment had already risen 44% — to $1,958 — year-to-date, according to real estate data provider Black Knight.

Meanwhile, at the start of the year, a buyer who could afford a monthly payment of $2,000 and a 20% set aside could buy a home for $450,000. Today, that same buyer could now only get a $350,000 house.

Rates have now risen for two consecutive weeks and are at the highest level since January 2008. The previous peak was 5.30% in mid-May.

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Average mortgage rates

Data based on US mortgages closed June 6, 2022

Type of loan June 6 Last week To change
15-year fixed conventional 4.82% 4.75% 0.07%
30-year fixed conventional 6.06% 5.92% 0.14%
ARM rate 7/1 4.91% 4.82% 0.09%
ARM rate 10/1 5.07% 4.97% 0.1%

Your actual rate may vary

Other loan categories are also higher this week. The average rate on a 15-year fixed rate mortgage rose to 4.81%, while the rate on a 5/1 variable rate mortgage rose to 4.33%.

On the other hand, “higher mortgage rates will lead to a moderation in the blistering pace of real estate activity that we have seen coming out of the pandemic, ultimately resulting in a more balanced housing market,” Khater predicts. .

Why Mortgage Rates rising and what’s next?

This week’s mortgage rate hike was widely anticipated. On Wednesday, the Federal Reserve announced it was raising the federal funds rate by three-quarters of a percentage point — the biggest interest rate increase since 1994.

Although the Fed doesn’t set mortgage rates, federal funds rates — what banks charge each other for overnight loans — have an indirect effect on what lenders charge for a home loan. When banks’ cost of borrowing increases, these higher costs are passed on to the consumer in the form of higher interest rates on all types of credit products, including mortgages.

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Average Mortgage Refinance Rates

Data based on US mortgages closed June 6, 2022

Type of loan June 6 Last week To change
15-year fixed conventional 5.09% 5.07% 0.02%
30-year fixed conventional 6.49% 6.35% 0.14%
ARM rate 7/1 5.36% 5.23% 0.13%
ARM rate 10/1 5.72% 5.6% 0.12%

Your actual rate may vary

The Fed hike was in response to higher than expected inflation. Last week, the May Consumer Price Index showed prices rose 8.6% in May compared to the same month last year. This is the largest year-over-year increase in 40 years. Most market watchers expected inflation to slow. Higher interest rates increase the cost of borrowing and hopefully reduce inflation.

“With the Fed’s announcement of a 75 basis point hike, the largest since 1994, we should expect continued volatility in the days and weeks ahead as the market continues to revalue. and attempts to settle at these rate levels,” said Robert Heck, vice president. mortgage at online broker Morty, wrote in an email to Money.

“Any persistent/clear signs of a wage or inflationary spiral will continue to lead to more aggressive policies,” Heck added. “In these extreme scenarios, it is very possible that we will see mortgage rates heading towards 7% or more, reflecting the inflationary environment of the 1980s.”

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