Mortgages got a bit more expensive this week – with a focus on “little”. Freddie Mac said Thursday that the average interest rate for a 30-year fixed-rate mortgage is back up to 3%, with fees of 0.6%. This is still incredibly low in historical comparison. These low interest rates, in turn, tempt home buyers to borrow more money to pay for soaring house prices.
The average purchase credit size rose to $ 411,400 last week. according to the Mortgage Bankers Association, the highest since February. The average home loan exceeded $ 377,000 in the last month, a record high.
“We have seen a very glowing appreciation in house prices across the country – in double digits across the country,” said Len Kiefer, Freddie Mac’s deputy chief economist. “That puts pressure on loan sizes because to buy a home at a higher price you have to borrow more money.”
MBA forecasting chief Joel Kan said the surge was partly due to the types of homes people are buying. The pandemic caused many newly removed workers to seek larger houses in the suburbs with more outdoor space.
“These homeowners are typically still employed, may have higher incomes, etc.,” Kan said. “You could possibly afford a little more.”
And lenders make it easier for them to borrow. The MBAs Availability index for mortgage loans last month increased nearly 5% for conventional loans and 7% for jumbo loans.
“That really depends on our economy improving, the job market improving, and lenders feeling a little more secure,” said Odeta Kushi, assistant chief economist at First American, a title insurance company.
Borrowers still need pretty pristine credit to qualify for a mortgage, she said. The median credit score for new mortgages for the first quarter of this year was 788, according to the Federal Reserve Bank of New Yorkcompared to 773 in the same period last year.
Even as loan balances rise, low mortgage rates have made monthly payments relatively affordable, said Michael Neal, senior research associate at the Urban Institute. The risk of larger mortgages – and looser lending standards – comes into play when prices suddenly fall.
“Those who recently got a mortgage have had less time to benefit from the appreciation in the property price, which increases the likelihood that they will be underwater,” Neal said.
Most analysts don’t expect prices to fall anytime soon, although a sharp rise in mortgage rates could slow price growth.
“It will be years before we can add enough supply to the market to create a balanced market,” said Kushi. “We expect real estate prices to remain positive.”