Mortgage rates make life harder for buyers despite price stagnation

We want to help you make more informed decisions. Certain links on this page – clearly marked – may direct you to a partner website and allow us to earn a referral commission. For more information, see How we make money.

Rising house prices are stagnating or even beginning to slide, but that’s not making buying a home any easier.

The main reason for the slowdown is also the difficulty for buyers despite some relief from prices and competition – mortgage rates are stubbornly high.

Rates have risen considerably this year, and again flirted with 6%. The average 30-year fixed-rate mortgage was 5.78%, down 6 basis points from a week ago, according to a weekly survey by Bankrate, which, like NextAdvisor, is owned by Red Ventures. Daily rate surveys showed averages rising above 6% on Friday.

Rates are up largely on market uncertainty about what action the Federal Reserve will take to rein in persistently high inflation, which was 8.5% year-over-year in July. Fed Chairman Jerome Powell said last week in a speech in Jackson Hole, Wyoming, that efforts to raise interest rates to bring inflation down “will cause hardship for households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.

The Fed has already raised its benchmark short-term interest rate several times this year and is expected to do so again later this month.

“At the Jackson Hole meeting, Jerome Powell basically reaffirmed that he would do whatever it takes to fight inflation and that rates would go as high as it takes to get there,” Daryl said. Fairweather, chief economist at Redfin. “He expressed that the job was not done. I think that made the market believe that debt is going to keep getting more expensive. This has already manifested itself in these higher mortgage rates.

How High Mortgage Rates Are Affecting Homebuyers

Mortgage rates are more than two percentage points higher today than they were at the start of the year, putting a strain on your budget when trying to buy a home. It’s especially difficult for first-time home buyers, who don’t have a home to sell to help cover some of the costs of a new home.

“That means buying a home is going to get more expensive, because that translates into higher monthly mortgage payments,” Fairweather says. “Buyers should know that if financing their home becomes more expensive, they should talk to their lender and figure out exactly what they can afford.”

Experts advise shopping around for a mortgage rate. Especially during times of rapid rate changes, the average is just an average. Different lenders can have very different rates, and you might find a great deal by getting loan estimates from three or four different lenders.

Pro tip

Shop around for different mortgage lenders. With rates constantly moving, you may be able to get a much better deal from another lender.

The housing market is slowing down

New data from Realtor.com shows that the housing market is starting to shift a little more in favor of buyers, at least in terms of competition. The median time a home was on the market increased year-over-year in August for the first time since June 2020, Realtor.com said, to 42 days. The median listing price has fallen over the past two months to $435,000 in August from a record high of $450,000 in June, although it is still 14.3% higher than it was in August 2021.

“For many buyers today, the rise in options for houses to sell takes away the sense of urgency they felt over the past two years when inventory was scarce,” the economist said. Realtor.com chief Danielle Hale in a statement. “Because of this change coupled with higher mortgage rates, competition continued to cool in August, with listing price trends indicating that home sellers are noticing buyers are tightening their purse strings. As we take advantage of the last days of summer, the housing market is starting to strike a better balance between buyer friendliness and still favorable selling conditions.

Buyers are beginning to find more bargaining power, being able to demand concessions from sellers that were unthinkable during the hot property market just months ago, experts say. This includes the ability to ask for a lower price or ask the seller to help cover closing costs or pay mortgage points to redeem that high interest rate.

“Sellers need to know buyers are working with less,” Fairweather says. “They have fewer resources available to make a high offer on the house. This is likely to result in lower bids and lower selling prices.

Close the gap

Black buyers are denied a mortgage to buy a home in twice the rate of the general population across the country’s 50 largest metro areas, according to a report by LendingTree, which analyzed data from the Residential Mortgage Disclosure Act of 2020. A likely contributor is the legacy of discriminatory policies such as redlining – in which borrowers were denied home loans in predominantly black neighborhoods – and discrimination by lenders against black borrowers. If you are denied a mortgage, keep shopping around with different lenders and maybe consider other types of loans, like FHA or VA loans. If you think you have been discriminated against, report it to your attorney general’s office or the US Department of Housing and Urban Development.

About Scott Conley

Check Also

6% mortgage rates? Instead, watch your monthly payment

Editorial independence We want to help you make more informed decisions. Certain links on this …