Rising interest rates have caused a sharp downturn in the housing market. According to the National Association of Realtors, home sales have fallen for six months in a row.

The 30-year mortgage rate has risen to 6.28 percent, up from 5.5 percent a week earlier

Mortgage rates rose sharply this week, as financial markets were rattled by fears of a potentially more aggressive rate hike from the Federal Reserve.

According to Mortgage News Daily, the average rate on the popular 30-year fixed mortgage rose 10 basis points to 6.28 percent on Tuesday. This comes after a 33 basis point increase on Monday. One week ago, the rate was 5.55 percent.

Rising interest rates have caused a sharp downturn in the housing market. Mortgage demand has dropped precipitously. According to the National Association of Realtors, home sales have fallen for six months in a row. Rising interest rates have done little to cool the red-hot housing market, which has been fueled by historically strong, pandemic-driven demand and record low supply.

The rate increase this week is the largest since the so-called taper tantrum in July 2013, when investors sent Treasury yields soaring after the Fed announced it would reduce its bond purchases.

Moving Markets

Mortgage rates had fallen to more than a dozen all-time lows in the first year of the pandemic, as the Federal Reserve pumped money into mortgage-backed securities. It recently discontinued that support and is expected to begin liquidating its holdings soon.

As a result, interest rates began to rise in January, with the average rate beginning the year at around 3.25 percent and rising each month. There was a brief respite in May, but it was fleeting.

Higher home prices and interest rates have suffocated home affordability.

For example, on a $400,000 home with a 20% down payment, the monthly mortgage payment increased from $1,399 in January to $1,976 today, a $577 difference. This excludes both homeowners insurance and property taxes.

It also excludes the fact that the house is about 20% more expensive than it was a year ago.

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