US mortgage rates are up again after two weeks in a row of decline, as the cost of home ownership continues to price potential buyers out of the housing market.
It causes some potential buyers to withdraw from agreements, reduce competition and increase the number of homes available for sale.
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Freddie Mac’s latest market survey for primary mortgages, published on Thursday, shows that the average interest rate for a 30-year fixed-rate loan is now 5.51%, up from 5.3% last week. Last year at this time, the price of the United States’ most popular mortgage product averaged 2.88%.
The average for a 15-year fixed interest rate note is also up, and climbed to 4.67% from 4.45% a week ago. For the same week in 2021, the 15-year interest rate was 2.22%.
“Mortgage rates are volatile as economic growth slows due to fiscal and monetary moves,” said Sam Khater, Freddie Mac’s chief economist. “With prices being the highest in over a decade, house prices at escalating levels and inflation continuing to affect consumers, affordability remains the major obstacle to home ownership for many Americans.”
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According to data from the Mortgage Bankers Association, the average purchase loan size has retreated from the record high of $ 460,000 reached in March, falling to $ 415,000 for the week ending July 8.
Meanwhile, the demand for mortgage applications has fallen for two weeks in a row. It is the latest sign that the housing market is cooling down as Americans struggle with 40 years of high inflation pushing their budgets and rising interest rates increase the cost of their monthly mortgage payments.
An increasing number of potential buyers are also getting nervous and withdrawing from deals.
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Last month, cancellations of home sales reached the highest frequency since the start of the pandemic, with approximately 60,000 home purchase agreements falling through, according to an analysis from Redfin.
“When mortgage rates rose to almost 6% in June, we saw a number of buyers back down from deals,” said Lindsay Garcia, a real estate agent from Redfin in Miami. “Some had to bow down because they could no longer get loans due to the interest rate jump. Buyers are also more skewed than usual due to financial uncertainty.”
Redfin’s chief economist, Daryl Fairweather, said in a statement on Thursday that the fall in demand is already here, pointing to a new report from the real estate agent which shows that the number of homes for sale across the country increased last month for the first time in three years.
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“The country’s economic problems have already cooled the housing market, and they are likely to continue to dampen demand,” Fairweather said. “The Fed has signaled that it can raise interest rates further to combat stubbornly high inflation, which could hurt consumer confidence, and lower stock prices mean fewer potential home buyers can afford a down payment.”
He advised sellers to commit, saying: “If you decide to sell, do it quickly before demand falls further. And price carefully – this is not the time to test the waters. You will do more harm than good if you overprices and have to make a price reduction or take the home out of the market. “
FOX Business’ Lucas Manfredi contributed to this report.