Mortgage rates increase for the first time in weeks

Mortgage interest rates increased last week after several consecutive weeks of decreases, according to the latest data from Freddie Mac.

The 30-year fixed-rate mortgage increased to 5.23% for the week ending June 9, according to Freddie Mac’s Primary Mortgage Market Survey. This is up from the week before when it averaged 5.09%, and up from 2.96% last year.

Similarly, the 15-year mortgage increased to 4.38%, up from 4.32% the week before and 2.23% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) also increased to 4.12%, up from 4.04% the previous week and 2.55% last year. 

"After little movement the last few weeks, mortgage rates rose again on the back of increased economic activity and incoming inflation data," Freddie Mac Chief Economist Sam Khater said.

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Home prices could begin decelerating

Home prices have risen to record highs, increasing 20.6% annually in March according to the latest Case-Shiller report. This marked the strongest increase in the history of the report. 

"Mortgages are becoming more expensive as the Federal Reserve has begun to ratchet up interest rates, suggesting that the macroeconomic environment may not support extraordinary home price growth for much longer," S&P Dow Jones Indices Managing Director Craig Lazzara said at the time of the report. "Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call."

Other experts agreed that rising rates could soon begin to cool rapid home price growth. 

"The housing market is incredibly rate-sensitive, so as mortgage rates increase suddenly, demand again is pulling back," Khater said. "The material decline in purchase activity, combined with the rising supply of homes for sale, will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home."

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Monthly mortgage payments rise 55% annually

Affordability has increasingly become a concern amid higher home prices and increasing interest rates. In fact, this has pushed monthly mortgage payments up more than 50% for new loans on median-priced homes compared to last year, one expert said.

"Real estate markets are laboring under the weight of record-high prices and rising mortgage rates," George Ratiu, Realtor.com's senior economist and manager of economic research, said. "Mortgage applications have been declining with both purchases and refinances seeing pullbacks in activity. Buyers of a median-price home are looking at a monthly mortgage payment that is 55% higher than it was a year ago, adding an extra $695 to their monthly expenses."

What’s more, rising inflation has put more pressure on consumers and pushed their expenses to new highs. Americans can combat these rising costs by finding more affordable choices when it comes to housing, Ratiu said.

"For many Americans looking for affordable pickets of housing, mid-sized cities remain a viable alternative, especially as the number of homes for sale has been on the rise, bringing fresh options," Ratiu said. "The overarching challenge is balancing the ability to find a well-priced home, which often means traveling farther away from city centers, with the potential need to commute to an office. 

"It is up to companies to maintain flexibility for a workforce which is being squeezed from all directions at once, or risk losing employees. The economic outlook is highly dependent on the well-being of the American consumer," he said.

If you are looking for a home in today’s market, you can contact Credible to speak to a home loan expert and get all of your questions answered.

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