Mortgage rates were on the rise again, hitting 8-year highs in the week ending 17th May, following the previous week’s hold, with mortgage applications continuing to fall through mid-May, May’s month-on-month applications looking weak following the 5% fall in April.
While home owners have found support from the current economic environment that has contributed to the tight labour market environment, rising borrowing costs have been joined by rising energy prices, with gas prices hitting 4-year highs ahead of the peak season for home buyers.
A combination of strong demand and low inventories have seen the upward trend in mortgage rates have a limited impact on the housing sector to date, but with inflationary pressures building, mortgage rates on the rise and house prices also rising, the housing sector could be in for a surprise should rates continue to rise at pace seen through the first 5-months of the year, with mortgage rates heading towards the 5% range.
The resumption of the upward trend will bring into question affordability, particularly with energy prices and house prices on the rise, which could begin to weigh on the demand side and begin easing pressure on inventories, though a shortage of skilled labour and rising material costs continue to be an issue for the sector and new home builds.
According to figures released on Wednesday, U.S building permits slipped by 1.8% in April, while housing starts slumped by 3.7%, which suggests further upward pressure on house price near-term, house price appreciation outpacing the tepid wage growth seen across the labour market.
Freddie Mac weekly average rates for new mortgages as of 17th May were quoted to be:
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30-year fixed rate loan rose from 4.55% to 4.61% last week to the highest level since 19th May 2011, while up from 4.02% a year ago.
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15-year fixed rates jumped from 4.01% to 4.08% last week, while up from 3.27% from a year ago.
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5-year fixed rates rose from 3.77% to 3.82% over the week, while up from last year’s 3.13%.
Mortgage Bankers’ Association Rates for the week ending 11th May were quoted to be:
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Average interest rates for 30-year fixed, backed by the FHA fell from 4.80% to 4.78%, easing back from recent Jul-11 highs.
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Average interest rate for 30-year fixed with conforming loan balances eased from 4.78% to $4.77%.
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Average 30-year rates for jumbo loan balances rise from 4.55% to 4.73%.
Weekly figures released by the Mortgage bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, fell by 2.7%, following the previous week’s 0.4% fall week-on-week. The fall coming off the back of the continued uptrend in mortgage rates and in spite of respite in the upward trend through the week ending 11th May.