WASHINGTON–The average rate for a 30-year fixed-rate home loan jumped to 4.67% last week, its highest point since December 2018, according to Freddie Mac.
The rate increase, while expected, has come much faster than many analysts expected. At the beginning of 2022, the average rate on America’s most popular home loan was 3.22%.
Nevertheless, “It’s going to take a pretty healthy increase in rates to moderate the demand,” Phil Shoemaker, president of originations at Homepoint Financial Corp., told the Wall Street Journal.
The Journal noted that to date higher rates haven’t dented consumer interest. The number of applications submitted by hopeful home buyers has risen for three of the past four weeks, according to the Mortgage Bankers Association trade group. Mortgage credit availability, a measure of lenders’ willingness to issue home loans, rose in February to its highest level since last May, the MBA said, though it remains far below recent highs, the Journal added.
As CUToday.info has reported, where rising rates are having an effect is in loan refi’s, after booming during 2020 and 2021, when rates were rock-bottom. According to mortgage-data firm Black Knight, Inc., about four million Americans could lower their monthly mortgage payments through a refinancing in February, down from close to 16 million a year ago.
Refinancings are expected to make up 33% of mortgage originations this year, down from 59% in 2021, according to the Mortgage Bankers Association.
A Market Correction?
So, will the rate increases lead to a correction in the housing market?
“The idea of loosening requirements at a time when the real-estate market has been going gangbusters…can give you flashbacks to 2005 and 2006,” said Greg McBride, chief financial analyst at Bankrate.com. But “credit is significantly tighter.”
The MBA said an increase in offerings for jumbo loans, those too big to qualify for a traditional government loan, and adjustable-rate mortgages have driven the expansion of mortgage credit, the MBA said.
“Still, Americans who want to buy a home this spring face plenty of challenges. At the current sales pace, the supply of homes on the market would last 1.6 months, a record low, according to the National Association of Realtors,” the Journal reported. “The median American household would need to devote 34% of its income to cover monthly payments on a median-price home in January, according to the Federal Reserve Bank of Atlanta. That is the highest since November 2008.