Mortgage rates climb back above 5%

Mortgage rates climb back above 5%
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The 30-year fixed-rate mortgage averaged 5.22% in the week ending Aug. 11, up from 4.99% the week before, according to Freddie Mac. That’s significantly higher than this time last year. when it was 2.87%.

“Although rates continue to fluctuate, recent data suggests the housing market is stabilizing as it moves from increased activity during the pandemic to a more balanced market,” said Sam Khater, chief economist at Freddie Mac.

Earlier this week, the Consumer Price Index for July indicated that the rate of inflation had begun to decline, mainly due to lower energy costs. Housing, which comprises about a third of the basket of goods and services tracked by the CPI, moderated slightly last month but remains high.
“Markets are looking for more certainty around the economic outlook as incoming data continues to highlight a steady level of business activity and consumer spending,” said George Ratiu, manager of economic research at “While concerns of a recession stay elevatedAugust seems to be offering a little respite.

Affordability remains a challenge

One of the reasons home prices continue to rise is the lack of available homes for sale. “Supply is still quite limited in most markets,” Khater said. “The consequence is that house prices will probably continue to rise, but at a slower pace for the rest of the summer.”

In addition to rising house prices, Inflation is taking a bigger slice of potential homebuyers’ income and the higher cost of borrowing is reducing their purchasing power.
How much house can I afford?

A year ago, a buyer who put 20% down on a $390,000 median priced home and financed the rest with a 30-year fixed-rate mortgage at an average interest rate of 2.87% had a monthly mortgage payment $1,294, according to the figures. by Freddy Mac.

Today, a homeowner buying the same price home with an average rate of 5.22% would pay $1,717 a month in principal and interest. That’s $423 more each month, according to figures from Freddie Mac.

The highest cost to finance a house has already had an impact on buyers, with both new-build and existing home sales falling in recent months. As prospective homebuyers respond to these rising costs, housing markets are showing signs of rebalancing.
“Inventory of homes for sale rose solidly in July, moving toward levels not seen since mid-2020,” Ratiu said. “With more properties available and less competition, more owners begin to adapt to the new reality and resorting to price cuts to incentivize buyers.”

The proportion of listed homes with price reductions reached 19% in July, approaching levels not seen since 2017, according to In addition, the pace of price growth has moderated.

“These changes point to a welcome change for buyers who are still in the market,” Ratiu said. “The upcoming fall season may offer an even better window of opportunity, provided the inventory picture continues to improve, as we have seen in recent months.”

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