Mortgage rates reach 5% for first time in over a decade

Home sellers lower asking prices as mortgage rates rise

Real estate adviser Kirsten Jordan discusses rising mortgage rates and the ‘cloudy’ housing market as first-time homebuyers grapple with surging prices and low demand.

The average interest rate for America's most common home loan has reached a high not seen in more than 10 years, Freddie Mac said Thursday.

The 30-year fixed-rate mortgage sits at 5%, up from 4.72% last week, according to the mortgage-lending giant's latest weekly Primary Mortgage Market Survey. At this time last year, the average was at 3.04%.

In this Friday, May 22, 2020, file photo, a sold sign sits in front of a house in Brighton, N.Y. (AP Photo/Ted Shaffrey, File) (Associated Press / AP Newsroom)

"This week, mortgage rates averaged five percent for the first time in over a decade," said Sam Khater, Freddie Mac’s chief economist. "As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation."

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Rates for 15-year fixed-rate mortgage loans climbed to 4.17% according to the survey, up from an average of 3.91% last week and 2.35% a year ago.

For a 5-year Treasury-indexed hybrid adjustable-rate mortgage, rates are now averaging 3.69%. Last week, the 5-year ARM was at 3.56%, and the same time a year ago it averaged 2.8%.

A “Sale Pending” sign outside a house in Discovery Bay, California, U.S., on Thursday, March 31, 2022.  (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)

Rising mortgage rates are not a surprise given the bargain rates homeowners obtained during the COVID-19 pandemic and the Federal Reserve's quarter-point hike last month aimed at tackling the surge in inflation that has accompanied the economy's recovery from shut-downs. 

Economists expect rates to climb further throughout the year. The Fed has signaled more increases will come as the central bank tries to cool inflation, which is currently at a 40-year high.

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The rising rates are already impacting consumer behavior in the housing market. The latest data from the Mortgage Bankers Association show borrower's interest in adjustable-rate mortgages surged 7.4% last week, the highest share since mid-2019.

A project manager moves a “Sold” sign near home construction sites in Kyle, Texas. (Matthew Busch/Bloomberg via Getty Images / Getty Images)

The MBA also found that refinancing applications declined by 5% last week to pre-pandemic levels.

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While the housing market is expected to slow as rates increase, demand remains strong. Both conventional and government purchase applications rose last week, according to the MBA's latest survey.

FOX Business' Ken Martin contributed to this story.

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