Average mortgage rate rises to highest level since November
A property for sale in Bellport. Credit: Newsday/Steve Pfost
The average 30-year fixed mortgage rate reached its highest level in five months this week, at 7.22%, according to Freddie Mac.
It was the fifth straight increase for the weekly measure. Last year at this time, the average was 6.39%. Last week, the average was 7.17%.
Steadily rising rates have come at an inconvenient moment, making homebuying more expensive during a typically busy time for the Long Island real estate market. As rates rise, borrowers lose buying power and may have to purchase less expensive homes — or drop out of the market.
“On average, more than one-third of home sales for the entire year occur between March and June,” Sam Khater, chief economist at Freddie Mac, said in a statement, citing national figures. “With two months left of this historically busy period, potential homebuyers will likely not see relief from rising rates anytime soon.”
Elevated mortgage rates have been a drag on Long Island home sales. The number of single-family home sales that closed fell nearly 16% in March compared with a year earlier across Long Island, according to OneKey MLS.
It’s important for homebuyers to remember that the Freddie Mac measure is merely an average and mortgage rates can vary widely across different lenders and loan types, said Larry Matarasso, a mortgage broker at Green River Capital in Plainview.
He said the most recent increase hasn’t scared away local homebuyers the way it had a few years ago. The average stood at 2.98% in April 2021.
“As opposed to the past, [when] every time the rate hit 7% people didn’t want to buy, now I think people are accustomed to the rates being in the neighborhood of 7%,” Matarasso said.
On Wednesday, the Federal Reserve said it would maintain its benchmark interest rate at its current level as it continues a campaign to drive the rate of inflation down to its 2% target.
U.S. consumer prices increased 3.5% in March compared with the previous year, according to the federal Bureau of Labor Statistics. For the 25-county New York metropolitan region that includes Long Island, prices rose 3.4% in March. Inflation hasn't slowed as much as expected so far this year.
Mortgage rates tend to rise during periods of inflation and fall when there is greater risk of recession.
The Fed announcement signals “there isn’t enough confidence that inflation will continue to drop toward the 2% target,” said Selma Hepp, chief economist at CoreLogic, which tracks property data. “We will continue to observe interest trends, but we don’t expect a meaningful dip in mortgage rates for the remainder of the year.”
On Long Island, the lack of available homes on the market has been a major challenge for buyers, and that shortage is due in part to homeowners being reluctant to move and relinquish a low mortgage rate.
With a major drop in rates unlikely, Matarasso doesn't expect to see enough homes hit the market this spring to reduce competition among buyers.
“If the status quo stays the same with rates, I don’t think we will see huge amounts of inventory out there,” he said.
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.
