More Americans are hesitating to get a housing loan as mortgage rates hit 6.75 percent – the highest in 16 years
. The rate hike serves as another blow to a population already haunted by inflation and economic woes.
Based on data released Oct. 5 by the Mortgage Bankers Association, the contract rate on a 30-year fixed mortgage climbed about a quarter percentage point in the last week of September. The hike marked the seventh straight weekly rate increase
and triggered the worst slump in home loan applications since the Wuhan coronavirus (COVID-19) pandemic started. The series of continuous increases in mortgage rates caused a roughly 14 percent drop in applications to purchase or refinance a home.
Mortgage rates have soared 1.30 percentage points in the last seven weeks, the highest surge over a comparable period since 2003. Experts expect the mortgage costs to stay on the record high as the Fed continues to hike its benchmark interest in its "intense" effort to cool inflation.
House hunters have been struck this year with a one-two combination of soaring mortgage rates and still expensive home prices. The option to go on renting is more realistic than buying a new one.
"It is beginning to look as though home sales will be crushed to the point where the only people buying homes are those with no choice, for family or job relocation reasons," Ian Shepherdson, chief economist with Pantheon Macroeconomics, said in a report.
As per 2021 calculations from the Federal Home Loan Mortgage Corporation, a buyer who put a 20 percent down payment on a $390,000 home and financed the rest with a 30-year fixed-rate mortgage at an average interest rate of 2.99 percent, had a monthly mortgage payment of $1,314. To buy the same-priced house with the increased interest rate, a loaner would pay roughly more than $2,000 per month. (Related: Redfin: House sales decline in Sun Belt as buyers back out due to hefty prices
Economic crisis, Hurricane Ian slow down mortgage applications
The current economic uncertainty compounded by Hurricane Ian's devastation in Florida resulted in a recent 14 percent decline in mortgage applications
, said MBA President and CEO Bob Broeksmit.
"The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone," MBA economist Joel Kan said. He added that there was an impact from Hurricane Ian's aftermath, which prompted widespread closings and evacuations.
With higher interest rates making an already pricey housing market even more expensive, homebuyers turned more to adjustable-rate mortgages, which offer a lower interest rate. That share of activity increased to 11.8 percent from 8.5 percent a month ago and around three percent at the beginning of 2022, when mortgage rates were less than half what they are now.
This week's mortgage rates may have been very slightly lower than last week's but all bets are off at the end of the week when the important monthly employment report is released. Analysts are awaiting investors' move, which would depend on the Fed's next action plans
for more news related to the United States' collapsing real estate and economic conditions.
Watch Gregory Mannarino warn about the impending burst of the U.S. home mortgage bubble
This video is from the What is happening channel on Brighteon.com
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