Mortgage rates hit five percent, the highest level in years. A level that many economist say could deter home buyers and represents another setback for the slumping housing market. The average rate for the 30 year fixed rate mortgage rose to 4.9%–the largest weekly jump in about two years–according to data released by mortgage finance giant Freddie Mac. Mortgage rates hit five percent, does not bode well for the economy moving forward.
Rates have been edging higher in recent months but during “the last week we’ve seen an explosion higher in mortgage rates,” said Rodney Anderson, a mortgage lender in the Dallas area. A five percent rate isn’t that high by historic standards. During much of the decade before the financial crisis, these rates hovered between 5 and 7 percent. But a return to more normal lending rates won’t feel normal to many buyers who have become accustomed to getting a mortgage loan at 4% or lower, and they could experience sticker shock at what they would have to pay now for a home loan.
“there’s almost a generation that has been used to seeing 3% or 4% rates that’s now seeing 5% rates, ” said Vishal Garg, founder and chief executive of Better Mortgage. For a house with a $250,000 mortgage, rates of 5% add about $150 a month to the monthly payment, compared with the rate of 4% that borrowers could have had less than a year ago, according to Lending Tree, Inc. an online loan information site. That excludes taxes and insurance.
With rates hitting recent highs at a time when housing prices have been going up, some economists suggest sellers may need to lower prices if borrowers can’t afford high prices in a higher rate environment. Higher mortgage rates have also slowed the housing market more than many expected. That’s a potentially troubling sign for the broader economy, since housing is often a bell weather for how rising interest rates could affect growth overall.