Economic research

Mortgage rates rise again, reaching 5.11%

Freddie Mac Mortgage Rates – April 21, 2022

What happened to mortgage rates this week:

The Freddie Mac fixed rate for a 30-year 30-year rose for the seventh consecutive week, to 5.11%, following the continued surge in the 10-year Treasury which broke the 2.8% mark for the first time since December 2018. Investors hailed better-than-expected growth in new residential construction while continuing to watch inflation. With consumer prices continuing to rise, markets expect long-term interest rates to rise in the near term. In addition, the Fed’s forward guidance calls for steeper increases in its short-term rate, coupled with a potential reduction in balance sheet assets by mid-year. Both monetary measures will result in higher borrowing costs for credit cards, auto and personal loans, and mortgages. Markets are also pricing in a likely 50 basis point hike at the next central bank meeting on May 4.andwe therefore expect mortgage rates to continue to rise.

What does that mean:

Real estate markets have felt the impact of currency shifts, with mortgage rates rising sharply over the past four months. With the cost of financing a home about 40% higher than a year ago, demand for homes is visibly declining as many first-time homebuyers find themselves unable to qualify for a mortgage on a home that meets their needs. While wages are rising sharply due to the severe labor shortage, they are still lagging behind rapid inflation. Buyers who were unable to lock in their rate find themselves unable to afford the much higher payment on today’s homes.

We’re starting to see that in market activity, with March existing home sales data showing a 2.7% drop. It’s no surprise that entry-level sales have fallen sharply from a year ago, but we’re starting to see the combination of tight inventory and rising rates also weighing on sales. in the mid-range of the market. Additionally, the latest weekly data from Realtor.com highlights that median list prices are faltering, with a noticeable moderation in the growth trajectory over the past four weeks. The Fed’s intention to cool demand appears to be working, driving housing markets toward a much-needed balance.


George RatiuGeorge Ratiu

George Ratiu