Housing News

Mortgage Interest Rates Rise, but Homebuyer Affordability Improves

Mortgage interest rates moved higher this week as renewed conflict in Iran pushed Treasury yields higher. Even so, improving affordability and a growing supply of homes for sale continued to give prospective homebuyers more reasons to enter the market.

The average rate on a 30-year, fixed-rate mortgage rose to 6.66% for the week ending July 30, according to Freddie Mac. That was up from 6.58% a week earlier but remained just below the 6.72% average recorded at this time last year.

Rates have been moving higher in response to the ongoing conflict with Iran and higher oil prices.

“Peace talks that had shown promise in early July have broken down,” said Anthony Smith, senior economist at Realtor.com, in a statement. “Markets are again reacting to the uncertainty, along with the inflationary pressure that comes as the conflict lifts oil prices.”

Mortgage rates tell only part of the affordability story.

“The housing market continues to benefit from more available [housing] inventory, providing prospective homebuyers with additional options and helping support buyer activity as mortgage rates fluctuate,” said Sam Khater, Freddie Mac’s chief economist, in a statement.

Homebuyer affordability improved slightly in June, according to the Mortgage Bankers Association’s Purchase Applications Payment Index (PAPI). The national median monthly mortgage payment for purchase applicants declined to $2,191 from $2,198 in May.

“Affordability conditions improved slightly in June, as prospective homebuyers benefited from lower loan application amounts despite a slight increase in mortgage rates,” said Edward Seiler, MBA’s associate vice president of Housing Economics and executive director of the Research Institute for Housing America, in a statement.

Seiler noted that steady income growth has outpaced the increase in monthly mortgage payments over the past year, providing prospective homebuyers with modest relief.

Looking ahead, the housing market could get an unexpected boost this summer.

“Most market signals indicate subdued conditions,” said Bright MLS Chief Economist Lisa Sturtevant, in a statement. “But it’s possible that we could see a surprise bump in transactions at the end of the summer if buyers expect mortgage rates to move higher in the fall.”