At the start of 2014, there was a lot of speculation that mortgage rates would rise to unaffordable levels, with many expecting to see 30-year fixed mortgage rates exceed 5%. However, luckily for homebuyers, mortgage rates have stayed historically low, with a 30-year fixed-rate mortgage recently hitting its lowest point all year, according to the latest Primary Mortgage Market Survey from Freddie Mac.
Here’s what the data showed for the week ending Aug. 21:
A 30-year fixed-rate mortgage hit 4.10%, down from 4.12% a week before and 4.58% this time last year.
A 15-year fixed-rate mortgage hit 3.23%, falling from 3.24% on a week-over-week comparison and 3.60% a year prior.
A 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.95%, marking a decrease from 2.97% a week ago and 3.21% on a year-over-year comparison.
“Mortgage rates were down slightly this week, following the decline in 10-year Treasury yields,” said Frank Nothaft, vice president and chief economist at Freddie Mac. “Meanwhile, housing starts in July jumped 15.7% to 1.093 million units after falling 4.0% a month earlier. Also, July’s consumer prices increased at a 0.1% seasonally adjusted pace, the slowest in five months.”
Renting unaffordable in major cities. A separate report from Zillow, a real estate marketplace, recently highlighted that it’s more affordable to purchase a home in 94 of the 100 largest metropolitan areas in the country rather than rent, primarily because mortgage rates remain so low.
“The affordability of for-sale homes remains strong, which is encouraging for those buyers that can save for a down payment and capitalize on low mortgage interest rates,” said Zillow Chief Economist Stan Humphries. “But the health of the for-sale market is directly tied to the rental market, where affordability is really suffering.”
The report noted that historically low interest rates and continually increasing rent prices have made buying more attractive. HousingWire reported that at the end of the second quarter, homeowners only had to put 15% of their income toward a mortgage, well below 22.1% prior to the housing collapse.
Humphries noted that even if mortgage rates were to hit 5%, they would still be affordable by historical standards. He said this would cause only 13 of the largest metros to become unaffordable for buying (just six metros are currently unaffordable).
As mortgage rates remain low and rents continue to increase, more Americans will be assessing their residential mortgage options.
Academy Mortgage is one of the top independent purchase lenders in the country as ranked in the 2013 CoreLogic Marketrac Report. Visit www.academymortgage.com to find a loan, get a rate, or calculate your payment today.
