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While rising mortgage rates put some homebuyers off, others say they’ve found a way around it.


'The numbers don't work': While rising mortgage rates put some homebuyers off, others claim they've found a workaround

‘The numbers don’t work’: While rising mortgage rates put some homebuyers off, others claim they’ve found a workaround

America’s most popular home loan became more expensive again this week, dealing another blow to guilty home shoppers who are staring at the highest debt costs in 20 years.

Medium Fixed mortgage rate for 30 years – currently flirting at 7% – more than double what it was at the beginning of the year.

Even as home price growth continues to slow, significantly higher financing costs are pushing buyers on the sidelines – or out of the market altogether.

“Numbers no longer suit them,” speak Lisa Sturtevant, an economist at Bright MLS in the mid-Atlantic region.

“That 7% line is also a mental hurdle for buyers, even those who still qualify,” she said. “They may be waiting to see if the rate falls.”

However, while many will be the buyer stopped searching, others found a solution to achieve higher rates.

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30-year fixed-rate mortgages

The average interest rate on a 30-year mortgage rose to 6.92% this week, up from 6.66% a week earlier, mortgage giant Freddie Mac report on Thursday. Last year at this point, the average rate was 3.05%.

The 30-year interest rate hasn’t been this high since April 2002.

“We continue to see a two-economy story in the data: Strong wage and employment growth is keeping consumer balance sheets positive, while inflation persists, recession fears and housing affordability is driving housing demand down sharply,” said Sam Khater, Freddie Mac’s chief economist.

“Without a doubt, the next few months will be critical for the economy and the housing market.”

15 year fixed rate mortgage

The typical interest rate on a 15-year mortgage was 6.09% this week, up from 5.90% last week, said Freddie Mac.

A year ago at this point, the average 15-year interest rate was 2.30%.

Buyers today are faced with a different reality than they were just a few months ago when many were forced to bid above asking price and forgo provisions to buy a home.

With the rate of making a house less affordable, sales have plummeted. In August, sales fell for a seventh straight month and were down 20% from a year earlier, according to the latest data from the National Association of Realtors.

5-year adjustable-rate mortgage

Interest rates on five-year adjustable rate mortgages (ARMs) averaged 5.81% this week, up from 5.36% last week.

Last year at this point, 5-year ARM averaged 2.55%.

ARMs start with a fixed interest period – typically three to 10 years. Interest rates are often lower than for fixed-rate loans, like the more common 30-year mortgage.

But when the initial term is over, the rate on ARM will adjust – up or down – based on benchmarks like Basic interest rate.

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Where mortgage interest rates are even higher

The Federal Reserve has raised trend-setting interest rates five times this year to slow down the economybut the uncomfortably rapid rise in consumer prices remains unabated.

That means more rate hikes – and while mortgage rates don’t correspond directly to changes in the Fed’s rates, they are still affected by them.

At the Fed’s last meeting, officials said the only way to combat inflation was to continue to adopt aggressive restrictive monetary policies.

“Many participants emphasized that the costs of taking too few actions to bring down inflation will likely outweigh the costs of taking too many actions,” according to newly released information. minute from the meeting.

A lower rate alternative

Some buyers are trying to avoid today’s higher borrowing costs by locking in their mortgage interest rates for a shorter period of time.

Corey Burr, a real estate agent in Washington, said: “The popularity of adjustable rate mortgages is growing very quickly, as many borrowers believe they will have a chance to refinance. capital into a fixed-rate mortgage at some point before their ARM adjusts.” DC area.

He said that borrowers considering this route should consider adjustable-rate loans with an initial term of seven or 10 years.

“That will increase the likelihood that a refinancing opportunity will take place,” Burr said.

Mortgage application this week

According to a weekly survey from Mortgage Bankers Association.

Refinance applications and purchases were both down 2% from the previous week.

References are down 86% year over year, while home loan applications are down 39%.

Mike Fratantoni, MBA’s chief economist, said ARM adoption rates also remained “fairly high” at 11.7%.

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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.

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