MortgageMortgage Rates

Purchase mortgage rates beginning to stabilize in the low 5% range

Inflation appears to be beyond its peak, which has stopped the rapid increase in rates

Purchase mortgage rates declined this week on the news that inflation appears to have peaked and appear to be stabilizing.

The 30-year fixed-rate mortgage decreased this week to an average of 5.13%, down from last week’s 5.22%, according to the latest purchase mortgage survey from Freddie Mac. A year ago this time, rates averaged 2.86%. The index compiles rates reported by lenders during the past three days.   

“Inflation appears to be beyond its peak, which has stopped the rapid increase in mortgage rates that the housing market was experiencing earlier this year,” Sam Khater, chief economist at Freddie Mac, said in a statement.

Mortgage rates reflect the Federal Reserve’s actions to control persistent inflation. The Fed raised interest rates by 75 basis points in July’s meeting, marking its fourth rate hike this year.  

According to the meeting minutes released on Wednesday, the Fed sees more hikes in the future, but the pace could slow given that the Consumer Price Index (CPI) in July was flat from the previous month.

Regarding the housing market, officials said in the minutes, “In contrast to many other borrowing rates, residential mortgage rates fell since the June FOMC meeting, in line with the drop in longer-term yields, but remained near their highest levels since 2010.”

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They added: “Credit in the residential mortgage market remained widely available for borrowers with higher credit ratings but tight for households with low credit scores. Volumes of home purchase mortgage originations declined in May and mortgage refinance volumes continued to fall,” they said.  

Affordability challenges have reduced borrowers’ appetite for mortgage loans. According to the Mortgage Bankers Association (MBA), the market composite index, a measure of mortgage loan application volume, declined 2.3% for the week ending Aug. 12, to the lowest level since 2000.

The refinance index had a 5.44% decline from the previous week, and the purchase index was down 0.8%.

“The market continues to absorb the cumulative impact of the large price and rate increases that led to a plunge in affordability,” Khater said. “As a result, over the rest of the year, purchase demand likely will continue to drag, supply will modestly increase, and home price growth will decelerate.”

On HousingWire’s Mortgage Rates Center, Black Knight’s Optimal Blue OBMMI pricing engine measured the 30-year conforming mortgage rate at 5.505% Wednesday, up from 5.351% the previous week. Meanwhile, the 30-year fixed-rate jumbo was at 5.323% Wednesday, up from 5.261% the week prior. 

According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.55% with an average of 0.7 points, down from last week’s 4.59. The 15-year fixed-rate mortgage averaged 2.16% a year ago. 

The 5-year ARM averaged 4.39% this week, down from 4.43% the previous week. The product averaged 2.43% a year ago. 

We’re covering this important topic at our HousingWire Annual event Oct. 3-5. Register here to join us in Scottsdale, Arizona.

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