Mortgage interest rates have surged to their peak levels since 2002, with an average of 7.09%. This marks a notable increase from the previous week’s average of 6.96%, as indicated by Freddie Mac’s latest Primary Mortgage Market Survey for the week ending on August 17, 2023. To put this in perspective, comparing it to the rate from a year ago at this very time, there’s a considerable difference of nearly 2%, with the previous rate standing at 5.13%.
The economy is surpassing initial expectations, which has driven an upward movement in the 10-year Treasury yield. As these rates continue to climb, their impact on affordability becomes more pronounced, leading to a decrease in demand and further intensifying the challenge of low inventory, which remains a primary cause of the slow-down in home sales.
The trend of escalating rates has resulted in a considerable number of potential homebuyers adopting a cautious stance. This affects our HFA (Housing Finance Agency) partners, who have heavily relied on TBA (To Be Announced) programs over the past decade. The surging rates have rendered it more challenging for low to moderate-income first-time homebuyers to qualify for affordable home loans. As a response to these changing dynamics, HFAs are revisiting the issuance of Mortgage Revenue Bonds, a strategic move that has become increasingly attractive due to the evolving interest rate landscape.
For more on this topic, please refer to: Mortgage Rates Reach Highest Point Since Spring 2002.