Mortgage Rates Spike for Third Consecutive Week | Mortgages and Advice

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Mortgage rates rose for the third week in a row, with the 30-year fixed rate reaching 7.39% – surpassing the recent record of 7.33% set last November. Most fixed and adjustable mortgage rates continued to creep higher, including the 15-year mortgage rate and 5/1 ARM rate, both of which are at their highest point since we began collecting this data in January 2022.

Here are the current average mortgage rates, without discount points unless otherwise noted, as of July 13:

  • 30-year fixed: 7.39% (up from 7.26% a week ago).
  • 20-year fixed: 7.44% (up from 7.32% a week ago).
  • 15-year fixed: 6.68% (up from 6.61% a week ago).
  • 10-year fixed: 6.73% (down from 6.79% a week ago).
  • 5/1 ARM: 6.23% (up from 6.12% a week ago).
  • 7/1 ARM: 6.46% (up from 6.25% a week ago).
  • 10/1 ARM: 6.61% (up from 6.5% a week ago).
  • 30-year jumbo loans: 7.43% (up from 7.31% a week ago).
  • 30-year FHA loans: 6.61% with 0.05 point (up from 6.51% a week ago).
  • VA purchase loans: 6.78% with 0.05 point (up from 6.69% a week ago).

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“Incoming data suggest that inflation is softening, falling to its lowest annual rate in more than two years. However, increases in housing costs, which account for a large share of inflation, remain stubbornly high, mainly due to low inventory relative to demand.”

– Sam Khater, Freddie Mac’s chief economist, in a July 13 statement

Mortgage rates have been rising sharply in the face of cooling inflation, but relief may be on the way if consumer prices continue to moderate, according to Lawrence Yun, chief economist at the National Association of Realtors.

“Low inflation means low mortgage rates,” says Yun. “Therefore, decelerating consumer prices could steadily lift home sales and increase home production in a few months.”

In fact, the Mortgage Bankers Association still expects 30-year fixed mortgage rates to decline to around 6% by year-end, but a more optimistic outlook in the coming months does little for buyers who are struggling to afford new housing payments now. Additionally, every drop in mortgage rates ushers in a wave of homebuyers who have been waiting for rates to fall, which could fuel competition in a market that’s already burdened by low inventory.

However, rates aren’t expected to dip as low as many consumers would like. A recent U.S. News survey found that two-thirds of would-be homebuyers have been holding out for lower rates, and most of them want to see rates drop below 6% before buying a home.

Indicator of the Week: Who Can Even Afford a Mortgage Now?

Homeownership has traditionally been considered a financial equalizer that allows Americans of all backgrounds and income levels to build lasting wealth. But stubbornly high mortgage rates and home prices have understandably pushed affordability out of reach for those on the lower end of the economic spectrum, while more affluent buyers continue to pursue homeownership.

The average credit score among borrowers who locked in a mortgage rate to buy a home reached a record high of 735 in June, according to a new report from Black Knight, a leading mortgage data analytics company. At the same time, home purchase prices continued rising while loan amounts remained static – which suggests borrowers are coming to the table with lower loan-to-value ratios.

In other words, this summer’s homebuyers are equipped with robust credit profiles and high down payments.

“What’s clear is that continued economic uncertainty, tightening credit and affordability concerns have all helped to skew the market toward higher-credit borrowers,” Andy Walden, vice president of enterprise research and strategy at Black Knight, says in the report.

It makes sense why good-credit, cash-flush Americans are able to buy homes today while the average consumer is struggling to do the same. The median monthly payment among new mortgage applicants was $2,165 in May, up from $1,526 in January 2022, according to MBA. That’s a difference of $639 per month. Meanwhile, average earnings rose by a much more modest $232 during that time frame, from about $4,741 per month at the start of 2022 to $4,973 in May, per Bureau of Labor Statistics data.

Beyond taking on a second (and third) job – or maybe hitting the lottery – there’s not much the average American can do right now to bring homeownership within reach. First-time buyers who don’t have equity to use for a down payment are among the most vulnerable in today’s housing market. For now, we can continue expecting more affluent, well-established homebuyers to dominate housing market activity.

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