Mortgage rates jumped to a shocking 6% as homeownership grows even more unaffordable for many homebuyers.
The average rate for a 30-year-fixed mortgage hit a level not seen since the 2008 housing crash, according to a weekly release from the Mortgage Bankers Association.
The new rate is also double what it was a year ago.
“Higher mortgage rates have pushed refinance activity down more than 80% from last year and have contributed to more homebuyers staying on the sidelines,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Rates have increased since the start of the year, in response to the Federal Reserve’s attempts to combat rising inflation.
As a result, demand for new mortgages has dropped as potential buyers have been forced out of the market due to hikes that limit what a buyer is able to afford. Nationally, purchase applications dropped about 30% this week, compared to the same week a year ago.
A Zillow analysis from over the summer revealed that as mortgage rates jumped, the average new mortgage payment in South Florida was $700 more than it was a year ago, or a 61% increase.
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Homebuyers have been forced to pivot to a different type of mortgage loan in an attempt to keep costs down. Lenders across South Florida reported that adjustable-rate mortgages, or ARM, have seen in uptick in popularity among buyers as they look for more affordable options.
“People are looking at ways to bring down their housing costs and their mortgage payments and with an adjustable-rate mortgage, it gives you the possibility of having a lower monthly payment initially,” J.C. de Ona, southeast division president of Centennial Bank, has said.
One of the biggest risks for these types of mortgages is that a homeowner’s monthly payment could change frequently, depending on the index and the margin at the time. There’s a chance that it could be lower if rates at the time are low, but there is also the possibility that a buyer’s monthly payment could jump.