Purchase mortgage rates have risen faster in the last three months than at any time since May 1994, climbing ever closer to the 5% mark due to a combination of rising inflation, the war in Ukraine, and disruptions to the supply chain. And bad news for homebuyers: there’s no sign that they’ll fall anytime soon.
The latest weekly Freddie Mac PMMS mortgage survey, released Thursday, showed that the average purchase mortgage rate touched 4.72%, up five basis points from the week prior. A year ago at this time, rates were at 3.13%. The GSE’s index accounts for just purchase mortgages reported by lenders over the past three days.
Another index shows mortgage rates even higher. Black Knight‘s Optimal Blue OBMMI pricing engine, which considers refis and data from the Mortgage Bankers Association (MBA), reported that rates on Wednesday averaged 5.05%, up about 25 bps from a week prior. Several LOs told HousingWire that clients had locked loans in the 5% to 5.3% range on Wednesday.
“Mortgage rates have increased 1.5 percentage points over the last three months alone,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “The increase in mortgage rates has softened purchase activity such that the monthly payment for those looking to buy a home has risen by at least 20% from a year ago.”
The central bank has signaled that it will raise interest rates another six times this year and several more in 2023 to control inflation, which reached the highest level in 40 years in February, at 7.9%.
Normally, a period of rising mortgage rates cools housing prices. But this is no normal market. The problem, of course, is inventory. National inventory of active listings declined by 18.9% over the last year in March, according to Realtor.com. Consequently, the March national median listing price for active listings was $405,000, up 13.5% compared to last year and 26.5% compared to March 2020.
The latest MBA survey this week found that the landscape is reducing borrowers’ demand for mortgages. Interest in residential mortgage loans fell 6.25% for the week ending April 1. While refi applications fell 10% from the prior week, purchase apps declined 3.4% in the same period.
Refinance applications are in a free fall, as few borrowers these days have an incentive to change their current loans rates. Additionally, home price appreciation and insufficient for-sale inventory are holding back purchase activity.
According to the PMMS report, the average 15-year fixed-rate mortgage averaged 3.56%, up six bps from the prior week. (On average homebuyers paid 0.8 mortgage points.) The 5-year Treasury-indexed ARM averaged 3.56%, up from 3.50% a week prior.