The average rate for a 30-year fixed loan nudged upwards to 5.81 percent this week, up slightly from last week’s 5.78 percent average rates, but more than two percentage points higher than the start of the year, according to the government-sponsored enterprise Freddie Mac. A survey this week of the nation’s largest lenders by Bankrate, a financial website, pegged the average rate for a 30-year mortgage closer to 5.91 percent.
Prospective home buyers taking out a $352,000 loan today could expect to pay about $540 more in monthly mortgage payments compared to taking out the same loan the first week of January when average rates were about 3.22 percent, excluding insurance and taxes. In Houston, the median home price hit $351,000 in May while the average home price reached $440,670, according to Houston Association of Realtors.
Even before this week’s mortgage rate jump, a typical homebuyer in Houston could expect to have paid about 23 percent more in their monthly mortgage payments in May compared a year earlier, according to the online real estate company Zillow. That estimates assumes a typical buyer in May was paying about $2,036 in monthly payments, including interest, taxes and principal for a $306,000 house, the typical home value in the Houston area in may, according to Zillow’s analysis.
“Mortgage rates took an unprecedented leap skyward over the past two weeks and quickly multiplied housing costs as they rose,” said Zillow economist Nicole Bachaud in a statement. “We are already seeing signs of waning demand, and expect these recent rate hikes to quicken the market’s needed rebalancing. While shoppers will likely experience less competition for homes than the frenzied recent months, their purchasing power has dwindled.”
Average mortgages rates are rising again after the Federal Reserve last week rose interest rates by three quarters of a percentage point, the highest jump since 1994. Although the central bank doesn’t set mortgage rates, its actions set the overall tone for mortgage industry. Expectations are that the rapidly rising rates coupled with the giant gains in home prices over the past couple years will finally start to price out more buyers, cooling what has been a red-hot real estate market nationally.
Although there could be a dip in home sales, Freddie Mac’s Chief Economist Sam Khater said that “in reality many potential homebuyers are still interested in purchasing a home, keeping the market competitive but leveling off the last two years of red-hot activity.”