By Anna Bahni, CNN Business
In the second big leap of 2022, mortgage rates rose again to a level not seen since the start of the pandemic.
The 30-year fixed-rate mortgage averaged 3.45% in the week ending January 13, up from an average of 3.22% the previous week, according to Freddie Mac. It’s the highest rate it’s been since March 2020, when it was 3.5%.
“Mortgage rates are up on all types of mortgage loans, with the 30-year fixed-rate mortgage up about a quarter of a percent from last week,” said Sam Khater, chief economist at Freddie Mac. “The rise in mortgage rates so far this year has not yet affected buying demand, but given the rapid pace of home price growth, demand is likely to weaken in the near future.”
Khater said the interest rate jump was driven by expectations that the Federal Reserve would more quickly curb its monetary stimulus measures in response to inflationary pressure. Consumer prices rose at the fastest pace in 40 years in December.
Another reason for higher rates is that the economy is improving in general, said George Ratio, director of economic research at Realtor.com.
“The moderate impact of the Omicron wave, despite the large number of cases, points to a brighter post-pandemic horizon, a sentiment that supports a more optimistic view of the economy,” Ratiu said.
But rising mortgage rates combined with record low inventory and higher home prices may push some buyers out of the market.
At today’s rates, median-priced home buyers pay about $219 more per month than last year, adding more than $2,600 to annual housing costs, Ratio said.
“With the prices of most consumer goods and services rising, buyers are feeling tight on their wallets,” Ratio said. “Affordability remains a major challenge for first-time buyers this year.”
There are also indications that some homebuyers have started shopping earlier than the usual spring buying season, Ratio said.
Last week, mortgage applications rose slightly from the previous week, according to the Mortgage Bankers Association. With so many people looking to buy a home, Joel Kahn, associate vice president of economic and industrial forecasting at the MBA, said he expects the number of applications for new mortgages to remain strong.
He said applications for government-backed loans — an attractive option for first-time home buyers and those with less money for a down payment or lower credit scores — have also increased, with applications for Federal Housing Administration (FHA) and VA loans up.
“The housing market started in 2022 on a strong note,” Kahn said. The MBA expects strong growth in purchasing activity this year, as demographics and a strong economy support housing demand. However, the strength of growth will depend on the housing stock growing more rapidly to meet demand.”
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