Home shoppers holding out for relief from rising mortgage rates may be in for a long wait.
Mortgage rates have climbed above 7%, reaching their highest level since May 2024 and it’s putting additional pressure on people looking to buy or refinance a home.
The Mortgage Bankers Association said mortgage applications fell 1.5% from the previous week as rates increased.
For current homeowners, refinance applications dropped 3% for the week and are down 62% compared with the same time last year.
Higher mortgage rates can add hundreds of dollars to a homebuyer’s monthly payment, depending on the size of the loan.
The increase comes as inflation remains elevated and oil prices have surged since the start of the Iran war. The Federal Reserve also raised interest rates last week.
While the Federal Reserve does not directly set mortgage rates, its decisions can influence bond markets, including the 10-year Treasury yield, which can affect mortgage rates.
The higher rates are also adding pressure to the housing market. Sales of previously occupied homes have declined for three consecutive months.
For buyers who are still shopping for a home, local real estate agent Tom Finigan said there are ways to potentially reduce costs.
“The real win would be to negotiate either closing costs from your lender or points off the mortgage because while you may save like $5,000 to $10,000 off the front line of the house, if you have a mortgage rate reduction paid for by the seller, you could save hundreds of dollars every month.Tom Finigan, local real estate agent
Finigan said refinancing remains an option for homeowners, although rates would need to fall before refinancing becomes more attractive for many borrowers.
Another trend emerging as mortgage rates rise is increased interest in adjustable-rate mortgages.
Applications for adjustable-rate mortgages now account for nearly 10% of the mortgage market, according to the Mortgage Bankers Association.