Mortgage rates have continued their upward ascent, putting a strain on the budgets for first-time home buyers.
The 30-year fixed-rate mortgage averaged 3.09% for the week ending Oct. 21, up four basis points from the previous week, Freddie Mac /zigman2/quotes/202741363/delayed FMCC -6.54% reported Thursda y. A year ago, the 30-year fixed-rate mortgage was averaging 2.8%.
The 15-year fixed-rate mortgage, meanwhile, rose three basis points to an average of 2.33%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.54%, down one basis point from the previous week.
The upward movement in mortgage rates followed the direction of bond yields, including the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% , which rose to the highest level since mid-May this week. That said, interest rates on home loans didn’t rise as steadily as bond yields, said Paul Thomas, vice president of capital markets at Zillow /zigman2/quotes/204413973/composite Z +11.32% /zigman2/quotes/205077794/composite ZG +10.53% .
“Markets continue to show concern over labor market shortages and supply chain issues that could put further upward pressure on prices and prompt the Federal Reserve to take more aggressive actions to address inflation,” Thomas said.
He added that markets view it as “fairly certain” that the Federal Reserve will taper its asset purchases, which include mortgage-backed securities. This is one of the moves the Fed is expected to take to get a handle on fast-rising consumer prices.
“Now the focus is on when and how many times the Federal Reserve raises the Fed Funds rate in 2022 and beyond,” Thomas added.
In light of rising mortgage rates, the real-estate market has snapped back to its usual pace of sales for this time of year, according to George Ratiu, manager of economic research at Realtor.com.
“There are still more hopeful buyers than available homes for sale, even as properties are spending slightly longer on the market,” he noted. Because of that, home prices are still rising, but not at the increase fast rate from earlier this year.
Consequently, rising interest rates and home prices will continue to squeeze people’s budgets — especially for first-time home buyers who may also be grappling with the rising cost of rent across most of the country.