The mortgage rate for the 30-year, fixed loan retreated slightly to 6.71% last week, but fluctuating rates may not be the biggest obstacle for prospective buyers. Instead, a lack of housing inventory is sustaining elevated prices and driving up competition for available homes.
Mortgage applications for home purchases have fallen, but easing demand may not be enough to prevent the Federal Reserve from raising its short-term benchmark rate even higher in the months ahead, the National Association of Realtors reports.
Mortgage rates also are contributing to the affordability conundrum, as rates are considerably higher than a year ago. As rates have moved up, mortgage applications for home purchases have fallen—not just because of reduced purchasing power but also “the ongoing lack of For Sale inventory in the market,” says Joel Kan, deputy chief economist of the Mortgage Bankers Association.
Mortgage rates can be influenced by the Fed’s rate but tend to follow more closely the trajectory of 10-Year Treasury notes. The spread between the 10-year Treasury note and current 30-year mortgage rates remains at an elevated level, so “expect mortgage rates to continue running in the 6% to 7% band for the next few weeks,” [George] Ratiu says.
Read more
