The average rate on a 30-year fixed-rate mortgage rose to 3.05% in the week of October 14, the highest rate since April, according to Freddie Mac. The 15-year fixed-rate mortgage rose to 2.3%.
Interest rates are now expected to gradually rise again, said Sam Khater, chief economist at Freddie Mac, as inflationary pressures build up due to the ongoing pandemic and tightening of monetary policy.
“Many potential homebuyers remain on the sidelines because of the high real estate price growth,” said Khater. “Rising mortgage rates combined with rising home prices make affordability more difficult for potential homebuyers.”
Refinancing is becoming less attractive to homeowners as interest rates rise, with the percentage of refinancing falling last week, according to a weekly survey by the Mortgage Bankers Association.
“We continue to expect refinancing activity to slow as interest rates rise and borrowers see fewer interest rate incentives,” said Joel Kan, associate vice president of economic and industry forecasting at MBA.
However, according to the MBA, sales requests rose, suggesting homebuyers keep going.
Financing costs remain affordable for most home buyers and provide a strong incentive for first-time buyers to keep searching, said George Ratiu, manager of economic research at Realtor.com.
“In mid-October, the number of homes for sale improved compared to the overheated first half of this year, resulting in slower price growth,” he said. “It seems that buyers and sellers are finally taking a step back from last year’s pandemic-induced onslaught in order to regain a foothold and reconsider their next steps.”