The average interest rate on a 30-year fixed-rate mortgage rose to 3.05% in the week ending Oct. 14, according to Freddie Mac, the highest rate since April. The 15-year fixed rate mortgage rose to 2.3%.
Now, rates are expected to continue to rise gradually, said Sam Khater, chief economist at Freddie Mac, as inflationary pressure intensifies due to the ongoing pandemic and tightening monetary policy.
“Many potential buyers remain on the sidelines due to the strong growth in house prices,” Khater said. “Rising mortgage rates combined with rising house prices are making affordability more difficult for potential buyers.”
Refinancing is becoming less attractive to homeowners as rates rise, with the share of refinances falling last week, according to a weekly Mortgage Bankers Association survey.
“We continue to expect weakening refinancing activity as rates rise and borrowers see fewer rate incentives,” said Joel Kan, associate vice president of economic and industrial forecasting at MBA.
But purchase requests have increased, according to the MBA, suggesting homebuyers continue.
Financing costs remain favorable for most homebuyers, giving first-time homebuyers a strong incentive to keep looking, said George Ratiu, director of economic research at Realtor.com.
“As of mid-October, the number of homes for sale has improved from the overheated first half of this year, causing price growth to slow,” he said. “It looks like buyers and sellers are finally taking a step back from last year’s pandemic-induced scramble to regain a foothold and reassess their next steps.”