Mortgage rates in the United States continued to rise this week, putting additional pressure on the cooling housing market and making it more difficult for Americans to afford homes. According to Freddie Mac, the average rate for a 30-year fixed mortgage increased to 7.63%, up from 7.57% the previous week and 6.94% a year ago. The rate for a 15-year mortgage also climbed to 6.92% from 6.89% last week and 6.23% a year ago.
Freddie Mac's chief economist, Sam Khater, advised borrowers to explore their options with multiple lenders before committing to loan terms as mortgage rates are expected to rise even further. Khater also emphasized the importance of down payment assistance, as research has shown that down payment is the biggest barrier for first-time homebuyers.
The rising mortgage rates are contributing to the decline in home affordability in the US. Home prices remain high due to a lack of supply, and the increasing mortgage rates are driving up monthly payments. Typically, rising interest rates would lead to a decrease in home prices, but homeowners who locked in lower interest rates are choosing to stay put rather than sell, further exacerbating the supply shortage.
The National Association of Realtors (NAR) reported that home prices rose for the third consecutive month in September, while existing home sales fell for the sixth straight month. The combination of low supply and rising mortgage rates has resulted in a worsening housing crisis, with sales reaching a low not seen since 2010, in the aftermath of the burst housing bubble.
Overall, the increase in mortgage rates is putting further strain on the already cooling housing market, making it more challenging for Americans to afford homes. The lack of supply and rising prices are causing existing home sales to decline, leading to a worsening housing crisis. Borrowers are encouraged to explore their options with multiple lenders and inquire about down payment assistance to mitigate the impact of rising mortgage rates.