Mortgage Rates Reach Highest Level Since November, Refinancing Still a Viable Option
Mortgage rates increased again this week, with the average rate on a 30-year fixed-rate mortgage hitting 7.16%, up from 6.73% last week, according to Freddie Mac.[0] This is the fifth consecutive week of rate increases, and the highest rate since November. Homebuyers are facing compounding challenges of affordability and low inventory, and the typical US homebuyer’s monthly mortgage payment hit an all-time high of $2,563.[1]
Mortgage applications increased 7.4% from one week earlier, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association’s (MBA).[2] The Refinance Index increased by 9% compared to the week prior and was 76% lower than the same week in 2022.[3] The percentage of mortgage applications for refinancing increased to 28.9% from 28.7%.[4]
The Federal Reserve does not directly determine the interest rates for mortgages taken out by borrowers, however, its decisions have an effect on them. The yield on 10-year US Treasury bonds, which is influenced by the expectations of the Federal Reserve's moves, their actual decisions, and investors' responses, affects the rate of mortgages.[5] Mortgage rates generally move in the same direction as Treasury yields; when Treasury yields rise, mortgage rates usually increase, and when Treasury yields fall, mortgage rates tend to decrease
The increase in mortgage rates can in part be attributed to inflation, and the Federal Reserve's implementation of a series of rate hikes in 2022 as a measure to counteract it. Though home prices have begun to decrease, it is unlikely that there will be significant drops, even in the event of an economic downturn. Mortgage rates will likely drop if the Federal Reserve can get inflation under control.
Refinancing can be a great move if you get a good rate or can pay off your loan sooner — but consider carefully whether it's the right choice for you at the moment. Do the math to see if it makes sense for your current finances and goals. If you do decide to refinance, make sure you compare rates, fees, and the annual percentage rate — which shows the total cost of borrowing — from different lenders to find the best deal.[6]
0. “Today's Mortgage and Refinance Rates: March 13, 2023 | Rates are High Now, but They Could Drop Later This Year” Business Insider, 13 Mar. 2023, https://www.businessinsider.com/personal-finance/best-mortgage-refinance-rates-today-monday-march-13-2023-3
1. “Mortgage Rates Move Up for the Fifth Week in a Row” Investopedia, 9 Mar. 2023, https://www.investopedia.com/mortgage-rates-keep-moving-up-7253593
2. “Redfin: Monthly Housing Payments Hit All-Time High” National Mortgage Professional, 10 Mar. 2023, https://nationalmortgageprofessional.com/news/redfin-monthly-housing-payments-hit-all-time-high
3. “Mortgage Application Volume Up Slightly, Despite Higher Rates” Mortgage News Daily, 8 Mar. 2023, https://www.mortgagenewsdaily.com/news/03082023-mortgage-application-volume
4. “MBA: Mortgage applications rise 7.4% despite increased rates” Atlanta Agent magazine, 9 Mar. 2023, https://atlantaagentmagazine.com/2023/03/09/mba-mortgage-applications-rise-7-4-despite-increased-rates
5. “Mortgage rates rise for the fifth-straight week” erienewsnow.com, 9 Mar. 2023, https://www.erienewsnow.com/story/48522475/mortgage-rates-rise-for-the-fifth-straight-week
6. “Current Refinance Rates on March 13, 2023: Rates Dip” CNET, 13 Mar. 2023, https://www.cnet.com/personal-finance/mortgages/current-refinance-rates-on-march-13-2023-rates-dip/
