30-year mortgage rates rise, remain at highest level in more than a decade

Mortgage rates responded to the Fed's rate hikes

Mortgage rates increased this week, remaining at their highest point since 2009, and economists predict that a recession could be looming. (iStock)

The 30-year fixed-rate mortgage rose once again this week, remaining at its highest level since 2009, as the Federal Reserve continues to raise rates, according to new data from Freddie Mac.

Rates for this longer mortgage term increased to 5.3% annual percentage rate (APR) for the week ending May 12, according to Freddie Mac’s Primary Mortgage Market Survey. This is up from 5.27% last week and 2.94% last year.

But not all mortgage rates increased. For example, the 15-year mortgage dropped to 4.48%, down from 4.52% last week but still up significantly from 2.26% last year. However, the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) increased to 3.98%, up from 3.96% last week and 2.59% last year. 

These increases are unlikely to let up anytime soon as the Federal Reserve plans more interest rate hikes for the year ahead. If you are interested in trying to lower your monthly mortgage payments, you could consider refinancing. An online marketplace like Credible lets you compare multiple mortgage lenders at once without affecting your credit score.


Federal Reserve to continue raising rates as economists warn of recession

The Federal Reserve raised interest rates by 50 basis points at its May meeting, marking the second rate hike this year and the highest increase in 20 years. It also raised interest rates by 25 basis points at its March meeting. But as inflation continues to rise, more rate hikes are likely ahead in 2022 and 2023.

"Mortgage rates continued their climb in response to the Federal Reserve’s increase in the target rate," Realtor.com Senior Economic Analyst Joel Berner said. "The Fed governors (as well as President Biden) have their sights set on reducing inflation, but the Consumer Price Index remains high: 8.3% above year-ago levels. 

"The stock market has taken notice of these grim indicators, and the major indexes continued their week-long slide," Berner said. "A dirty word is on the lips of American economists and financiers: ‘recession.’" 

More economists are beginning to predict that a recession could be looming. In its latest forecast, Fannie Mae predicted that the GDP would grow by 7.4% in 2022, but could see a recession in 2023 by way of a 9.7% decline.

If homeowners are interested in taking advantage of current mortgage rates before they rise further, refinancing their home loan could help them get a lower interest rate and save on their monthly payment. Visit Credible to find your personalized interest rate without affecting your credit score.


Challenges mount for prospective homebuyers

As mortgage interest rates and home prices rise, the housing market is growing more challenging and expensive for potential homebuyers. 

"Homebuyers continue to show resilience even though rising mortgage rates are causing monthly payments to increase by about one-third as compared to a year ago," Freddie Mac Chief Economist Sam Khater said. "Several factors are contributing to this dynamic, including the large wave of first-time homebuyers looking to realize the dream of homeownership. In the months ahead, we expect monetary policy and inflation to discourage many consumers, weakening purchase demand and decelerating home price growth."

A shortage of homes for sale is helping drive up prices and making it more expensive for borrowers to purchase a home, another economist said. And mortgage rates are unlikely to decrease anytime soon. But the affordability challenges could price some buyers out of the market and begin decelerating home price growth in the months to come. 

"The challenges continue to mount for prospective homebuyers," Berner said. "Listing prices are at record highs and homes for sale are at historic lows. The rising cost of living and falling value of investments makes saving for a down payment more difficult, and higher mortgage rates make borrowing for a home more expensive. 

"With regulators focused on stemming inflation, we’re not likely to see a significant drop in mortgage rates in the near future," he said. "Some buyers are getting priced out of the housing market ahead of the busy summer season, taking some pressure off of listing prices, which have been climbing at historic rates. Some early indications of this price slowdown can be seen in the percentage of listings that have had price reductions, which has increased year-over-year in each of the past two months."

If you are looking to buy a home amid today’s rising prices and interest rates, comparing multiple lenders can help you find the best mortgage rate for your loan amount. You can also contact Credible to speak to a home loan expert and get all of your questions answered.

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