Mortgage Rates Close In on 4%, Making Home Affordability Tougher - The Wall Street Journal

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Mortgage rates hit their highest level in almost three years, further straining affordability in a market where prices have risen steeply.

The average rate for a 30-year fixed-rate loan was 3.92% for the week ended Thursday, according to mortgage-finance giant Freddie Mac, up from 3.69% a week earlier. That is the highest level since May 2019.

Expectations...

Mortgage rates hit their highest level in almost three years, further straining affordability in a market where prices have risen steeply.

Expectations that the Federal Reserve will raise interest rates several times this year to control inflation are driving up mortgage rates, which are closely tied to the 10-year U.S. Treasury. The yield on the benchmark note traded near a recent high of 2% Thursday. At their meeting last month, officials at the central bank discussed accelerating the pace of planned rate increases if inflation doesn’t subside.

Mortgage rates have now risen for three straight weeks. A year ago, the rate on America’s most popular home loan was 2.73%, just above its record low of 2.65%. Still, rates remain near historic lows.

When borrowing costs increase, home buyers are faced with a choice: pay more or find less-expensive homes. Less-costly homes are hard to find in many places; the median sales price of an existing home rose close to 20% last year.

Higher rates, coupled with continued growth in prices, are pushing some would-be home buyers to the sidelines.

“As rates and home prices rise, affordability has become a substantial hurdle for potential homebuyers,” Sam Khater, Freddie Mac’s chief economist, said in a written statement.

Mortgage applications fell 5.4% from a week earlier last week, according to Mortgage Bankers Association data. Mortgages are less affordable relative to income than at any time since the fall of 2008, according to the Federal Reserve Bank of Atlanta.