The recent rise in mortgage rates are adding more stress to buyers who are struggling with high home prices. For the week ending April 1, the 30-year fixed-rate mortgage averaged 3.18%, up one basis point from the previous week. This marks the seventh consecutive week mortgage rates have climbed, now reaching the highest level since June 2020. Though still relatively low, rising mortgage rates are adding thousands to buyer’s mortgages amid high home prices. According to Realtor.com’s senior economist, current rates will add $93 per month for a mortgage payment, equating to $1,100 a year or $33,000 over 30 years.
First-time buyers find it impossible to compete
“Many first-time buyers are finding it impossible to compete against repeat buyers with considerable equity from their prior home or all-cash institutional investors willing to waive all contingencies,” Ratiu said. “The increase in mortgage rates is adding yet another obstacle for these home buyers to overcome.”
Already there are signs that some buyers are calling it quits in today’s housing market. At the start of 2021, home-buyer demand sat 25% above pre-COVID levels, Freddie Mac chief economist Sam Khater said in this week’s rates report. Today, demand is only 8% above pre-COVID levels.
“Although mortgage rates remain low, we are beginning to see a pullback by those looking to enter the housing market,” Khater said. “This is confirmation that while purchase demand remains strong, the marginal buyer is feeling the affordability squeeze resulting from the increases in mortgage rates and home prices.”