A Biden administration rule is set to take effect that will force good-credit home buyers to pay more for their mortgages to subsidize loans to higher-risk borrowers., even as home prices have begun to pull back this year.
"Homebuyer affordability eroded further in May as prospective buyers continue to grapple with high interest rates and low housing inventory," Edward Seiler, the MBA’s associate vice president of housing economics, said in a release last week.The size of the mortgage and the interest rate on the loan influence how large the monthly payment on a 30-year fixed-rate mortgage will be. Those two housing market variables have ballooned in recent years.
Still, the national median home price remains nearly 40% higher than it was three years ago. Meanwhile, the average rate on a 30-year home loan climbed to a new high for the year this week at 6.81%, mortgage buyer Freddie Mac said Thursday. That's more than double what it was two years ago.The combination, along with a stubbornly low level of homes for sale, is driving mortgage payments higher, pushing the limits of what many homebuyers can afford.