Big Picture: The 30-year fixed-rate mortgage rate has slightly decreased to 7.12%, a drop of six basis points over the past week, according to the latest data from Freddie Mac. Yet, despite the dip, housing affordability remains a pressing issue in the U.S.
Why it matters: Mortgage rates play a significant role in determining the country’s housing affordability. Even with the current dip, high rates coupled with skyrocketing prices have kept homeownership beyond the reach of many Americans.
By the numbers:
- The 30-year fixed-rate mortgage was 7.12% as of Sept. 7, down from 7.18% the previous week. This same rate stood at 5.89% a year ago.
- The 15-year mortgage rate has also decreased, averaging 6.52%, a drop from 6.55% last week. A year prior, it was at 5.16%.
How they got the data: Freddie Mac’s numbers are based on many applications from lenders all over the U.S. These applications are submitted to Freddie Mac once a borrower applies for a mortgage.
From the experts:
- Freddie Mac: “While inflation has decelerated, firmer economic data have put upward pressure on mortgage rates,” commented Sam Khater, the chief economist at Freddie Mac.
A deeper look at housing affordability:
- The U.S. housing affordability index by the National Association of Realtors remained at a record low since July. The index stood unchanged at 87.8, equaling the lowest level since records began in 1989.
- An index value of 100 indicates that a family with a median income has sufficient income to qualify for a mortgage on a median-priced home.
- Starting July, a typical family spent 28.5% of their income on mortgage principal and interest, tying the record high. To qualify for a mortgage, based on a 20% down payment, the required income hit a record $104,496 in the same month.
The bottom line: While mortgage rates have shown a minor decline, the overarching issue of housing affordability remains unchanged. The combination of high prices and rates means homeownership (and starting a family) is only an option for the upper middle and the rich.