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It's no secret that the homebuying market looks a lot different than it did over the last two years. For one, continually increasing mortgage rates are making the process even less affordable and average home prices are still near all-time highs.
Average rates for the ever-popular 30-year fixed-rate mortgage have been floating around the 5% mark since April this year — the first time in over a decade — with the most recent weekly average rate clocking in at 5.81% at the time of this writing.
When comparing all this to 2020 and 2021, rates have certainly gone up. However, putting today's 30-year rate in context with how the average rate has trended over the last few decades shows us that it's still relatively low — and relatively affordable.
According to Freddie Mac data going back to 1971, the long-term average for 30-year mortgage rates is just under 8%, with the record-high average reaching a whopping 16.64% in 1981. All in all, in context, today's 30-year 5.81% rate still falls below the historical average rate.
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What to keep in mind when looking at mortgage rates Options to secure an affordable mortgage todayWhile financing a new home can certainly seem daunting, a mortgage is generally seen as "good debt" to take on. Real estate or more specifically, the land it sits on — tends to appreciate over time, meaning it goes up in value over the long-term.
Today's economic climate, however, rightfully makes it a bit harder to make a down payment on sa new home given the rising prices of everything else. That said, there are lenders who offer some good options.
Chase Bank, for example, offers a DreaMaker℠ loan that allows homebuyers to make a down payment as low as 3% if they meet certain income requirements. This is an attractive financing option for those who want to make as small a down payment as possible in order to reserve more money for other expenses.
Chase BankApply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Conventional loans, FHA loans, VA loans, DreaMaker℠ loans and Jumbo loans
3% if moving forward with a DreaMaker℠ loan
Another solid option is SoFi, which offers homebuyers a number of discounts that can help them save as much money as possible throughout the homebuying process. If you lock in a 30-year rate for a conventional loan, you can receive a 0.25% discount on your interest rate. And when you purchase a home through the SoFi Real Estate Center, powered by HomeStory, you can receive up to $9,500 in cash back. Another appealing perk is that SoFi members can also get a $500 discount on their mortgage loan.
SoFiApply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Conventional loans, jumbo loans, HELOCs
Today's increasing mortgage rates are giving homebuyers reason for pause, yet with rates projected to go up even more, it's worth considering locking in what is still a relatively low rate today, historically speaking.
Remember that the mortgage rate you receive will depend on personal variables such as where you live, your credit score and how much you expect to put as a down payment, plus the mortgage type, term and amount.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
The days of record-low mortgage rates are fading into the rearview mirror. But how high they could still go remains uncertain.
Last week, the average rate on the popular 30-year fixed mortgage jumped to 5.81%, up from 5.78% the week prior, according to Freddie Mac. Since the start of the year, rates jumped more than 2.5 percentage points.
The rapid climb has sidelined homebuyers and rate-locked homeowners who are unwilling to give up their current ultra-low rate and trade up. Economists, too, are rejiggering their forecasts after the spike in rates, shifting their predictions for this year yet again.
“We’re reassessing where we think rates will go,” Len Kiefer, deputy chief economist for Freddie Mac, told Yahoo Money. “There’s no doubt there's a lot of volatility. The upward pressure on rates came very suddenly in the marketplace, and some of the biggest jumps we’ve seen in 40 years or so. Where that lands is really going to depend on a lot of expectations.”
Black swans this year — from an unrelenting rise in inflation to surging oil prices from the unexpected war in Ukraine — rippled through the economy and didn’t spare the housing market. The mercurial elements have left industry experts divided on where rates will still go this year.
One consensus among economists: Rates will continue to climb.
“It’s very challenging,” Kiefer said. “We have to look at what to expect over the next six to 12 months and what the markets and policymakers do.”
With inflation running at 40-year highs, the Federal Reserve recently increased its short-term benchmark interest rate by three-quarters of a point two weeks ago. It also signaled increasing the rate by 1.75 percentage points over the four remaining meetings scheduled this year.
Rick Nazarro of Colonial Manor Realty talks with a pair of interested buyers in the driveway as a couple waits to enter a property he is trying to sell during an open house on in Revere, MA. (Credit: Blake Nissen for The Boston Globe, Getty Images)
The effects have cut across the housing market, Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors, told Yahoo Money. Market investors moved in anticipation of most Fed hikes, which caused mortgage rates to jump aggressively within the last six months.
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“We expect mortgage rates to continue to rise in 2022, but I don't expect to see the same sharp increases that the market experienced in March and April,” Evangelou said. “For June, I anticipate the average at 5.5% and likely to see the 6% rate in the month of July. By the end of 2022, the average rate should average 5.8% to 5.9% for the year.”
At the start of the year, Fannie Mae forecasted rates would reach a high of 3.3% by year end. Meanwhile, the Mortgage Bankers Association was more aggressive, predicting that rates would hit 4% by the end of 2022.
Rates, so far, have raced past those predictions.
“Rates have surged in recent weeks,” Evangelou said. “Although we use Freddie Mac as the benchmark rate, we’re already seeing rates at 6% in some areas. However, we need to keep in mind that inflation will start slowing sometime in the second half of the year, causing rates to increase at a slower pace.”
A 'for sale' sign hangs in front of a home on June 21, 2022 in Miami. (Credit: Joe Raedle, Getty Images)
Although some economists predict interest rates will continue to balloon, Joel Kan, associate vice president for the MBA, believes they could retract with time.
“Given our forecast of 5.1% to 5.2% for mid-year and we’re up to 6% now, there may be some near-term upside risk to rates,” Kan told Yahoo Money. “We’re seeing a lot of volatility in rates in a span of weeks and last month, but it can go back. We’re in a period of high, remarkable volatility that will calm down a little bit once we have a clearer picture of the Fed balance sheet runoff. It might settle to that 5% range.”
Where rates go have real consequences for homebuyers, especially those with tight budgets. According to NAR, at current rates, homebuying costs about $800 more every month since the start of the year.
“It hurts affordability,” Evangelou said, “especially for middle-income home buyers that can afford to buy fewer homes.”
A person pushes a stroller past a home that is offered for sale in the Wicker Park neighborhood in Chicago. (Credit: Scott Olson, Getty Images)
Although home inventory had increased 13% compared to January, double-digit home price growth and rising rates have priced out large swaths of first-time buyers. According to an NAR analysis, buyers earning $75,000 can currently afford about 25,000 fewer listings now compared with January. While there are nearly 20,000 more homes available for buyers earning $200,000, there just aren’t enough entry-level homes available.
Even higher rates — that at least one economist is bracing for — would make that math worse for buyers.
“I think by the end of the year — this is purely my personal opinion, putting my thumb out into the wind — don't be surprised to see 6.5% and to hedge myself 6.5-7%,” Jim Gaines, research economist at Texas A&M’s Real Estate Center, told Yahoo Money.
But, he added, “the Fed and the government historically want to encourage homeownership. They really don't want the mortgage rate to get that high that it will be a detriment to the market.”
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.
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Mortgage rates have reached their highest levels in nearly 15 years, a factor that's contributing to a continued cooling of a housing market that's been white-hot for over two years.
Data from Freddie Mac show mortgage rates at just under 6 percent, the highest rate the country has seen since November of 2008.
Those numbers represent a steep increase from last year, when a 30-year fixed mortgage rate went as low as 2.8 percent.
The increase comes as the Federal Reserve has been raising interest rates in an effort to combat spiraling inflation, raising fears of a potential recession and bringing nonstop real estate sales to something of a grinding halt in recent months.
Home sales have dropped notably over the first half of 2022, with the National Association of Realtors noting that May marked the fourth straight month of decline for existing-home sales.
"Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance," NAR Chief Economist Lawrence Yun said in the release.