Mortgage rates’ rise to 7% dampens home sales

Homebuyers contend with harsh new normal

Mortgage Rates on The Rise Add Pressure to Home Sales

(Photo Illustration by The Real Deal with Getty)

Recent moves by mortgage rates are putting a damper on a year that began with some signs of hope for activity in the housing market. 

The average on a 30-year, fixed-rate loan this week exceeded 7 percent in Freddie Mac’s data for the first time this year, Bloomberg reported. The 7.1 percent average rate rose 22 basis points from last week, hitting its highest level since November and its largest weekly increase in roughly a year. 

Additionally, the most recent survey from the Mortgage Bankers Association recorded a 7.13 percent average 30-year rate for the week ending on Apr. 12, the highest average contract interest rate for a mortgage with a conforming loan balance this year.

The rise in rates comes as the National Association of Realtors reported existing home sales in March — after mortgage rates began to climb — dropped 4.3 percent from February, the largest monthly decline since November 2022. 

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One area that picked up under pressure was mortgage activity, with applications for purchases and refinancings rose 3.3 percent on a seasonally adjusted basis from the prior period for the week ending on Apr. 12, according to the weekly Mortgage Bankers Association survey.

“Application activity picked up, possibly as some borrowers decided to act in case rates continue to rise,” MBA chief economist Joel Kan said in a statement on Wednesday.

Further rate gains are likely in store. Recent economic reports have revealed a strong economy and persistent inflation in the country. If those factors remain the case, the Federal Reserve may hold off on the interest rate cuts it had planned for this year.

But even with the uncertainty around rate moves in store for this year, homebuyers will likely have to make peace with elevated housing costs. A homebuyers’ median monthly housing payment surged to a record $2,775 in the last four weeks, according to Redfin, up 11 percent year-over-year; the median home sale price was $380,250, just short of the all-time record.

Holden Walter-Warner