Mortgage rates surge past 5% - what this means for homebuyers

Mortgage rates surged past 5% this week, marking the seventh consecutive week of mortgage rate increases, according to new data from Freddie Mac. 

The average 30-year fixed-rate mortgage increased to 5.11% annual percentage rate (APR) for the week ending April 21, according to Freddie Mac’s Primary Mortgage Market Survey. This is up from last week's 5% and last year’s 2.97%. 

Other mortgage rates also increased this week. The 15-year mortgage rate nearly doubled since last year, rising to 4.38%. That’s up from 4.17% last week and 2.29% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) also increased to 3.75%, up from 3.69% last week and 2.83% last year. 

If you’re interested in refinancing your mortgage, comparing multiple lenders can help you get the best rate available for you. Visit Credible to find your personalized rate without affecting your credit score.

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Competition is softening for homebuyers

Although rising interest rates and higher home prices are making homeownership more expensive for many homebuyers, it is also helping reduce the intense competition seen in the housing market over the past year.

"Mortgage rates increased for the seventh consecutive week, as Treasury yields continued to rise," Freddie Mac Chief Economist Sam Khater said. "While springtime is typically the busiest homebuying season, the upswing in rates has caused some volatility in demand. It continues to be a seller’s market, but buyers who remain interested in purchasing a home may find that competition has moderately softened."

Currently, the cost of financing a home is 40% higher than it was a year ago, and the demand for new homes is visibly cooling, according to Realtor.com.

"While wages are seeing strong gains due to the significant labor market shortage, they continue to lag behind fast-paced inflation," George Ratiu, Realtor.com's manager of economic research, said. "Buyers who weren’t able to lock their rate are finding themselves unable to afford the much higher payment on today’s homes."

If you are looking to purchase a home in today’s market or want to refinance your mortgage, you can visit Credible to compare multiple mortgage lenders at once and choose the one with the best rate for you.

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Mortgage rates to continue rising

Mortgage interest rates are expected to continue rising as the Federal Reserve plans to raise rates up to three times in 2022 and more in 2023. 

"With consumer prices continuing to rise, markets expect long-term interest rates to push higher over the short term," Ratiu said. "In addition, the Fed’s forward guidance projects sharper increases in its short-term rate, coupled with potential reduction in balance sheet assets by midyear. 

"Both monetary actions will translate into higher borrowing costs for credit cards, auto and personal loans, and mortgages," he said. "Markets are also pricing in a likely 50 basis point hike at the central bank’s next meeting on May 4, so we expect mortgage rates to continue to rise."

If you want to take advantage of interest rates before they rise further, you could consider refinancing your mortgage. To see if this is the right option for you, you can visit Credible to speak to a home loan expert and get all of your questions answered.

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