Orange County Register reports highest mortgage rates of the year, soaring to 6.81%

In the United States, mortgage rates have experienced a significant increase this week, primarily due to the persistence of inflation and a robust job market. According to data from Freddie Mac, the 30-year fixed-rate mortgage averaged 6.81% in the week ending July 6, a rise from the previous week’s rate of 6.71%. Comparing these figures to a year ago, the 30-year fixed-rate mortgage was 5.30%. Freddie Mac’s chief economist, Sam Khater, attributes this upward trend in mortgage rates to a resilient economy, ongoing inflation, and a more hawkish tone from the Federal Reserve. Unfortunately, the combination of high rates and limited inventory continues to price many potential homebuyers out of the market.

To determine the average mortgage rate, Freddie Mac considers mortgage applications received from numerous lenders nationwide. The survey focuses on borrowers who provide a 20% down payment and possess excellent credit. Recently, mortgage rates have followed the same upward trajectory as the yield on 10-year Treasuries. Economic data suggests that stubborn inflation may persist at an elevated level. Realtor.com economist Jiayi Xu points out that while the headline Personal Consumption Expenditures price index decreased from 4.3% to 3.8% between April and May, the core index only experienced a slight decline from 4.7% to 4.6%. The Federal Reserve remains determined to bring inflation back to its target range of 2%.

Xu predicts that while there may be near-term upward pressure on interest rates, including mortgage rates, there could be a gradual decrease throughout the year, potentially bringing rates close to 6% by the end of the year. The high mortgage rates have presented challenges for the housing market during the summer. Existing homeowners have delayed their plans to sell and move due to the high rates, despite elevated home prices. Realtor.com reports that around 82% of home shoppers feel “locked in” by their current low-rate mortgages. Additionally, limited inventory has resulted in fewer homes for sale compared to the previous year, with new listings trailing 20% behind last year’s pace.

Furthermore, rising interest rates have become a significant concern for those planning to purchase a home in the near future. Realtor.com data shows that roughly 78% of home shoppers anticipate being priced out of the market if home prices and mortgage rates continue to rise. The Mortgage Bankers Association reveals that mortgage applications declined to their lowest level in a month, as rates for most loan types increased. Joel Kan, MBA’s vice president and deputy chief economist, explains that while rates are over a percentage point higher than a year ago, housing affordability remains a challenge in many areas. However, there has been a decrease in the average loan size for purchase applications, indicating a shift towards more affordable options in some market segments.