The 30-year fixed-rate mortgage averaged 7.23% in the week ending Aug. 24, up from 7.09% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.55%.
The inventory of existing homes has dramatically declined as homeowners who previously locked in lower rates are reluctant to sell. The combination of low inventory and high costs has squeezed would-be homebuyers and sent overall home sales way down.The 10-year Treasury yield has been hovering above 4.0% since the start of the month, which has helped drive mortgage rates over 7%.
While the Fed does not set the interest rates that borrowers pay on mortgages directly, its actions influence them. Mortgage rates tend to track the yield on 10-year U.S. Treasuries, which move based on a combination of anticipation about the Fed's actions, what the Fed actually does and investors' reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.
This is resulting in higher borrowing costs for consumers, and that isn't expected to change in the near term. On top of the higher rates, homebuyers pulled back last week because of an erosion of their purchasing power, said Joel Kan, MBA's vice president and deputy chief economist. "Low housing supply is also keeping home prices high in many markets, adding to the affordability hurdles buyers are facing."
Plus, she said, as rents notch a third month of declines, hopeful first-time home buyers may have more reasons to take their time or extend their lease, rather than rushing into a challenging and expensive market.
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