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Mortgage rates continued inching up this week, nearing a threshold that would bring the average American household to a financial tipping point, warns Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®.
The 30-year fixed-rate mortgage jumped to an average of 5.66%, Freddie Mac reported Thursday. A 5.7% mortgage rate would force the typical household to spend over 25% of its annual income on a median-priced home, Evangelou notes on the Economists’ Outlook blog. Most financial experts consider homeowners to be “house burdened” at that level.
There’s a strong likelihood that mortgage rates move even higher, Evangelou writes, noting that the recent rise in the 10-year Treasury yield is influencing borrowing costs. Mortgage rates are nearly double what they were a year ago.
However, relief may be on the horizon for buyers. Fannie Mae predicted this week that the 30-year fixed-rate mortgage will drop to an average of 4.5% in 2023. Still, economists say home buyers who can afford to purchase now are better off moving forward rather than waiting for lower mortgage rates. Even if borrowing costs drop next year, high home prices likely will remain a challenge, Keith Gumbinger, vice president of the research firm HSH, recently told CNBC.
Freddie Mac reported the following national averages with mortgage rates for the week ending Sept. 1:
- 30-year fixed-rate mortgages: averaged 5.66%, with an average 0.8 point, increasing from last week’s 5.55% average. Last year at this time, 30-year rates averaged 2.87%.
- 15-year fixed-rate mortgages: averaged 4.98%, with an average 0.8 point, rising from last week’s 4.85% average. A year ago, 15-year rates averaged 2.18%.
- 5-year hybrid adjustable-rate mortgages: averaged 4.51%, with an average 0.4 point, increasing from last week’s 4.36% average. A year ago, 5-year ARMs averaged 2.43%.
