Advertisement

Mortgage rates surge by more than half of a percentage point

Mortgage rates surge by more than half of a percentage point
Published: Jun. 17, 2022 at 8:38 PM EDT
Email This Link
Share on Pinterest
Share on LinkedIn

SPRINGFIELD, Mass. (WGGB/WSHM) -Mortgage rates surged by more than half a percentage point this week. The largest one-week increase since 1987 according to Freddie Mac. This comes amid rising inflation and an interest rate hike by the federal reserve.

It’s been a busy few years for the Acuna Family Brokerage in Springfield, dealing with the red-hot housing market.

“It’s been crazy. It’s definitely been a different market than I’ve ever seen in my entire career,” said Elias Acuna, broker for Acuna Real Estate.

Since the pandemic, Elias Acuna said home prices surged, boosted by cheap borrowing costs. But this week’s interest rate hike, an effort to dial back historic inflation, means borrowers will face higher costs.

“Things were going hot and heavy and loans were coming in very quickly, mortgage rates were extremely low, and almost overnight rates shot up 1 percent, 2 percent, 3 percent,” said Robert Ciraco, vice president, chief lending officer for Arrha Credit Union.

Ciraco has already seen a steep decline in loan applications as the fed’s interest-rate rises.

The 30-year fixed-rate mortgage averaged 5.78 percent this week, up from 5.23 percent last week. This time last year, it was an average of 2.93 percent.

According to Freddie Mac, a year ago, a buyer who put 20 percent down on a $390,000 home had a monthly mortgage payment of about $1,300. For that same home today, the payment would be more than $1,800, that’s up more than $500 a month.

“I think everybody’s gotten to the point where they thought that if the rate didn’t start with three it was no good, or even a two, but this is definitely a more normalized rate market over when you’re looking at the history of interest rates and mortgage rates,” Ciraco explained.

Acuna said this could ultimately result in a more balanced housing market.

“Maybe less offers going so far above the asking price, we’ll probably still see multiple offers and we might start seeing situations where sellers are offering credits for closing costs or repairs,” Acuna said.

Despite there being 25% more houses on the market in Springfield right now, compared to this time last year, inventory is still low.

“There’s so few houses available, even with less buyers there’s still not enough houses out there for those buyers,” Acuna said.

Ciraco said it’s good time to speak to a lending expert, as many options are available, including putting as little as 3 percent down and both experts contend that it’s better to buy now if you’re looking for something long-term.

“People are struggling to qualify now and a lot of people are actually just thinking about waiting until hopefully, interest rates come back down. I don’t know that that’s necessarily a good idea however because buying a home is always better than renting,” said Ciraco.

Right now, Acuna Real Estate said Springfield has the highest inventory of homes for sale, whereas East Longmeadow and Longmeadow have the fewest listings.