Surging rates are "adversely impacting the housing market," Freddie Mac says.
The 30-year fixed mortgage rate is now mere basis points away from reaching 7%, Freddie Mac reported Thursday.
Freddie’s latest survey showed that the 30-year fixed-rate mortgage averaged 6.94% as of Oct.20, up from 6.92% last week and 3.09% a year ago. The 15-year fixed-rate mortgage posted a 14-basis-point jump to 6.23%, and the five-year Treasury-indexed hybrid adjustable-rate mortgage was up 10 basis points week over week to 5.71%.
Sam Khater, chief economist of Freddie Mac, noted that while mortgage rates slowed their upward trajectory this week, “the 30-year fixed-rate mortgage continues to remain just shy of 7% and is adversely impacting the housing market in the form of declining demand.”
According to the Mortgage Bankers Association, mortgage application volume has plunged to its lowest level in 25 years, with refinance and purchase applications down 7% and 4%, respectively.
“The speed and level to which rates have climbed this year have greatly reduced refinance activity and exacerbated existing affordability challenges in the purchase market,” said MBA deputy chief economist Joel Kan. “Residential housing activity ranging from new housing starts to home sales have been on downward trends coinciding with the rise in rates.”
“Homebuilder confidence has dropped to half what it was just six months ago, and construction, particularly single-family residential construction, continues to slow down,” Khater added.
US housing starts declined 8.1% to a seasonally adjusted rate of 1.44 million in September as rising interest rates continue to exacerbate existing affordability issues. Single-family starts fell 4.7% to an annualized rate of 892,000 in September, while multifamily starts were at a 530,000 pace.