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Mortgage interest rates are increasing for the second week in a row




Mortgage rates rose from a week ago, adding to frustration for buyers already struggling with an unfriendly housing market.

The rate on the 30-year fixed-rate mortgage rose to 6.43% from 6.39% the previous week, according to Freddie Mac. While interest rates have moderated since November when they hovered around 7%, they have been largely stuck in the mid-6% range since the beginning of the year.

Prices add another layer of difficulty for buyers, who also face inventory challenges, high home prices and – soon – repricing of mortgage fees. Meanwhile, homeowners are reluctant to sell, exacerbating the acute shortage of properties for sale.

“As we enter the typically busy spring season, affordability remains the primary concern in the housing market,”[ads1]; said Realtor.com economist Jiayi Xu.

Upcoming changes to mortgage fees

As potential buyers watch market conditions, Fannie Mae and Freddie Mac are set to update their mortgage fees next month to improve housing affordability for riskier buyers.

Overall, the Federal Housing Finance Agency is set to increase fees on conventional loans for borrowers with higher credit scores, while potential buyers with lower credit scores will pay less than before when closing on a mortgage. The changes come on 1 May.

Often, lenders convert these fees into a higher interest rate, and it can add up.

For example, under the revised pricing system, a home buyer with a credit score of 739 and a 20% down payment faces a 1.25% surcharge. That’s half a point more than the previous surcharge of 0.75%, according to Realtor.com. The difference adds another $2,000 in closing costs on a $400,000 loan.

“The new policy could exacerbate the challenges for well-qualified buyers, many of whom are repeat buyers,” Danielle Hale, chief economist of Realtor.com, said in a statement. “Since these home buyers usually have better credit scores, it is revised [fees] will likely compound their concerns along with facing higher mortgage rates.”

Stock shortages crush buyers

Mortgage interest rates are increasing for the second week in a row

Chad Wootton looks at listings of homes for sale while talking on the phone in Los Angeles. (Credit: Jae C. Hong, AP Photo)

It could also exacerbate the current inventory shortage.

In total, there are 414,000 detached houses on the market nationwide, according to Altos Research. Although there is 50% more active inventory than last year at this time, it is still 50% less than in 2019.

So the buyers who remain have a hard time closing a deal simply because they can’t find a house to buy.

For example, pending home sales for March fell 5.2% from the previous month, much more than expected, the National Association of Realtors reported Thursday. The culprit behind the collapse? Lack of properties for sale, NAR’s chief economist said.

With few homes for sale and more buyers, prices are rising.

The median price of single-family homes increased to $444,481 this week, up 1% from a week earlier, Altos Research noted. The median price for new listings and for homes under contract also increased from a week ago. It jibes with two separate indexes this week that showed national home prices rose month-over-month in February, surprising economists.

Higher rates are likely to remain high unless inventories improve, Doug Duncan, chief economist at Fannie Mae, told Yahoo Finance. However, homeowners remain locked into their current low prices, exacerbating the inventory shortage.

“The challenge for the sellers is that if they sell today, they’re probably going to have to take a higher interest rate if they’re going to buy another house,” Duncan said. “If they have to use a mortgage, then they’re likely to give away some of the equity they’re taking out in the higher payment because mortgage rates are up.”

“So it’s a seller’s market,” he said, “with that caveat.”

Gabriella is a personal finance journalist for Yahoo Finance. Follow her on Twitter @__gabriellacruz.

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