Mortgage rates jump higher after nearing 6%
Mortgage rates jumped this week, pulling further away from 6% and again weighing on homebuyer confidence ahead of the spring selling season.
The rate on the 30-year fixed mortgage increased to 6.32% from 6.12% the week prior, according to Freddie Mac. Rates had been flirting with 6% in recent weeks and were more than three-quarters of a point lower than in mid-November when the rate neared 7%.
But the recent spike eroded some of the newfound purchasing power buyers gained recently, dampening spirits. The small window for refinancing has also shut for many homeowners.
“In terms of home buying, elevated rates certainly are a deterrent for potential homebuyers,” Keith Gumbinger, vice president of HSH.com, told Yahoo Finance. “Still-high home prices combined with relatively high mortgage rates have crushed affordability.”
Purchase applications tumble
The number of Americans who said it’s a good time to buy fell to 17% in January from 21% in December, according to Fannie Mae. A year ago when rates were slightly above 3%, roughly 59% of respondents thought it was a good time to buy.
“Potential buyers remain quite sensitive to the current level of mortgage rates, which are more than two percentage points above last year’s levels and have significantly reduced buyers’ purchasing power,” Joel Kan, deputy chief economist at the Mortgage Bankers Association, said in a statement this week.
That was evident in the latest measure of homebuying activity.
The volume of mortgage applications for a purchase fell 6% for the week ending Feb.10, marking its second drop in three weeks due to higher rates, according to MBA’s latest survey of applications. Overall purchase application volume was down 40% from a year ago, the MBA cited, its lowest point since the beginning of the year.
“Our latest analysis shows the income needed to buy a median-priced existing home in the fourth quarter of 2022 was about 48% higher than that which was needed in the fourth quarter of 2021,” Gumbinger said. “That's not something that's easily overcome when incomes are only rising about 5% per year or so.”
Window to refinance could be closing
A brief chance to refinance is fading fast for a handful of homeowners.
Only 403,000 high-quality candidates could shave at least three-quarters of a point off their mortgage by refinancing at last week’s rate of 6.12%, according to figures mortgage technology and data provider Black Knight gave Yahoo Finance.
That pool of candidates shrunk further this week and could get even smaller soon after, according to several experts who expect some rate volatility after recent consumer prices data showed inflation still stubbornly high.
“Mortgage rates are shifting higher already. There's been enough economic data of late to suggest that the economy is still running pretty strong and inflation isn't fading as quickly as hoped,” Gumbinger said, adding that he expects mortgage rates to increase around a quarter-point from the 6.09% registered earlier this month as a result.
This echoes rate expectations from George Ratiu, Realtor.com’s manager of economic research, who added that rates would likely move in the 6% to 7% range over the next few weeks.
“For housing markets, the rebound in rates translates into higher mortgage payments, adding pressure on homebuyers,” Ratiu said.
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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