No More Record-Low Mortgage Interest Rates?

While mortgage rates have been rising the last few months, they are still historically low compared to the trend over the last four decades, Freddie Mac says in a blog post.

But rates as low as they were in November 2012 — when the 30-year fixed-rate mortgage reached an all-time low of 3.31 percent — aren’t likely to return any time soon, the mortgage giant says. Still, Freddie assures borrowers that the all-time record high of 18.63 percent reached in October 1981 isn’t on the horizon either. (At 18.63 percent, monthly mortgage payments on a $200,000 loan would be $3,117, compared to $992 a month at today’s 4.32 percent average.)

With mortgage rates at 4.32 percent, 123 of the 157 metros that Freddie Mac tracks remain very affordable to households earning the median income. In order for affordability to be hampered in the majority of markets, interest rates would have to reach 7 percent, according to Freddie Mac.

“Stubbornly high unemployment over the last several years coupled with stagnant income growth exacerbates declining affordability in a rising interest rate environment,” per Freddie’s blog post. “More jobs and income growth would help blunt the effects of higher interest rates and make buying a home more accessible. While jobs and income have shown some improvement in recent months, they continue to be challenged.”

Historic overview of mortgage rates at source:  Mortgage Rates: From Dirt Cheap, to Cheap,” Freddie Mac (March 24, 2014)

 

Rising Prices Chip Away at Housing Affordability

Strong year-over-year price gains are starting to take a bite into housing affordability, according to the National Association of REALTORS®’ latest quarterly report.

“The vast majority of home owners have seen significant gains in equity over the past two years, which is helping the economy through increased consumer spending,” says Lawrence Yun, NAR’s chief economist. “At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago. This is beginning to hamper housing affordability.”

The national median existing single-family home price in the fourth quarter was $196,900, up 10.1 percent from $178,900 one year earlier.

NAR’s Housing Affordability Index, calculated on the relationship between median home prices, median family incomes, and the average effective mortgage interest rate, dropped to 175.8 in 2013 from a record high of 196.5 in 2012. The higher the index, the stronger household purchasing power is, according to NAR.

Source: REALTOR® Magazine Daily News

 

Mortgage Interest Rates ‘Surge to 2-Year High’

Average fixed-rate mortgages edged higher this week to the highest average in two years as speculation mounts that the Fed will soon taper its bond purchase program.

The Fed’s bond-buying program had been keeping mortgage rates at or near all-time lows in recent months. But as the economy improves, the Fed has indicated that it will soon taper its program, which will likely send rates higher.

Freddie Mac reports the following national average rates for the week ending Aug. 22:

  • 30-year fixed-rate mortgages: averaged 4.58 percent, with an average 0.8 point, rising from last week’s 4.40 percent average. A year ago at this time, 30-year rates averaged 3.66 percent.
  • 15-year fixed-rate mortgages: averaged 3.60 percent, with an average 0.7 point, rising from last week’s 3.44 percent. Last year at this time, 15-year rates averaged 2.89 percent.
  • 5-year adjustable-rate mortgages: averaged 3.21 percent, with an average 0.5 point, dropping from last week’s 3.23 percent average. Last year at this time, 5-year ARMs averaged 2.80 percent.

Source: Freddie Mac