Homebuyers are reeling from the sharp rise in mortgage rates, which reached 7.37% for the 30-year mortgage on Thursday, up from 7.11% earlier in the week, as reported by Mortgage News Daily. This quarter-point increase follows a hotter-than-expected inflation reading, prompting concerned reactions from investors.
Freddie Mac also observed an uptick in weekly average rates, climbing to 6.88% from 6.82% the previous week.
The elevated rates have put pressure on prospective buyers, leading both repeat and first-time buyers to reconsider their purchase plans. For many, any fluctuation in rates results in a significant loss of purchasing power.
With inflation persisting at high levels, the outlook remains unfavorable for mortgage borrowers, according to housing industry experts.
Lawrence Yun, chief economist at the National Association of Realtors, commented, “March inflation figures were very bad, which also means bad news for interest rates.”
Despite the challenges posed by soaring rates, there was an unexpected surge in refinance applications as rates surpassed the 7% threshold. The Mortgage Bankers Association (MBA) reported a 10% increase in refinance applications for the week ending April 5, driven primarily by Veterans Affairs (VA) refinance applicants.
While homeowners rushed to capitalize on lower rates through refinancing, prospective buyers faced a different scenario. Demand for purchase applications declined by 5% for the week ending April 5, according to the MBA, signaling a significant drop compared to the previous year.
Amidst concerns over rising rates, only 21% of respondents surveyed by Fannie Mae expressed optimism about the current market conditions for homebuying.
However, there is a glimmer of hope on the horizon as Fannie Mae predicts a gradual increase in inventory and a potential thawing of the housing market. With historically low rates behind us, some households are adjusting to the new normal of higher rates, which could help alleviate some of the current market pressures.
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