Mortgage rates at their highest since March 2020

The 30-year fixed-rate mortgage averaged 3.45% in the week ending Jan. 13, compared to an average of 3.22% the previous week, according to Freddie Mac. This is the highest average rate since March 2020, when it reached 3.5%.

“Mortgage rates have risen across all types of mortgages, with the 30-year fixed rate mortgage up nearly a quarter of a percent from last week,” said Sam Khater, chief economist by Freddie Mac. “The rise in mortgage rates so far this year has yet to affect buying demand, but given the rapid pace of house price growth, it will likely dampen demand in the near future.”

Another reason rates are rising is that, overall, the economy is improving, said George Ratiu, head of economic research at Realtor.com.

“The slight impact of the Omicron wave, despite the high number of cases, points to a brighter post-pandemic horizon, a sentiment that underpins a more optimistic outlook for the economy,” Ratiu said.

But rising mortgage rates, along with near-record inventory and rising home prices could push some buyers out of the market.

At the current rate, buyers of a median-priced home are paying about $219 more per month than they were a year ago, adding more than $2,600 to their annual housing costs, Ratiu said.

“With prices for most consumer goods and services rising, shoppers are feeling the pinch on their wallets,” Ratiu said. “Affordability continues to be a central challenge for first-time buyers this year.”

There are also indications that some homebuyers have started shopping earlier than the typical spring buying season, Ratiu said.

Last week, mortgage applications rose slightly from the previous week, according to the Mortgage Bankers Association. Because there are so many people looking to buy a home, Joel Kan, associate vice president of economic and industry forecasting at MBA, said he expects the number of new mortgage applications remains high.

Applications for government-backed loans — an attractive option for first-time home buyers and those with less money for a down payment or lower credit scores — have also increased, he said. said, with applications for Federal Housing Administration (FHA) loans and VA loans on the rise.

“The housing market started 2022 on a high note,” Kan said. “MBA expects solid growth in buying activity this year as demographic drivers and a strong economy support housing demand. However, the strength of growth will depend on faster growth in housing inventory to meet demand.

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