As the summer home buying season gets into full swing, mortgage rates have risen to their highest level in more than seven years and are forecast to increase even more throughout the year.
According to the latest Freddie Mac Primary Mortgage Market Survey, average rates have increased week-to-week in 15 out of 21 weeks this year. This is the most sustained increase to start a year since Freddie began tracking data in 1972.
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For the week ending May 24, 2018, the average 30-year fixed mortgage rate was 4.66 percent, up from 4.61 percent the week before. Rates for 30-year mortgages started the year at 3.99 percent.
The average rate on a 15-year fixed mortgage rose from 4.08 percent to 4.15 percent last week. At the beginning of 2018, 15-year rates averaged 3.44 percent.
The average rate for a 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) was 3.87 percent in the last survey, up from 3.82 percent the week before. The average was 3.47 percent at the beginning of the year.
Freddie expects mortgage rates to continue their gradual climb, predicting a 30-year fixed rate to average 4.9 percent by the end of the year.
In addition to higher mortgage rates, people in the market for new houses are also dealing with a dearth of inventory, which has contributed to higher home prices.
Despite these market forces potentially working against home sales, Freddie is forecasting a 3.3 percent annual increase in sales this year.
“At a time when housing inventory remains extremely low, it’s worth watching whether these higher borrowing costs lead some would-be sellers to stay put in their current home,” said Sam Khater, Freddie Mac’s chief economist.
“Inventory shortages would likely worsen if more homeowners decide not to sell out of reluctance of having a new mortgage with a higher rate.”