Mortgage rate is more than 7% and it becomes more difficult to qualify for a loan

It’s a double whammy for potential home buyers. Not only are the interest rates going up, it is also getting more and more difficult to qualify for a loan.

The average 30-year fixed-rate mortgage rose more than 7% at the end of last week, according to Daily Mortgage News, and is expected to reach around 7.125% on Tuesday. It’s been over 7% for several days.

Meanwhile, the availability of mortgage loans is now at its lowest level since March 2013, when housing was in a slow recovery from the financial crisis at the end of the last decade. It fell for the seventh consecutive month in September, down 5.4% from August, according to a monthly index released by the Mortgage Bankers Association.

While lenders may be in dire need of business, as Mortgage Demand Decreased Because rates are higher, they are also more concerned about a weak economy, which could lead to higher rates of delinquency. Executives and economists have warned that the US could do just that Fall into stagnation in the coming months While the Federal Reserve raises rates to battle high inflation.

“There was less desire for a low and high credit score [loan-to-value] loan programs, Joel Kahn, an economist with the Mortgage Bankers Association, said in a statement.

Currently, mortgage defaults are near record lows. While new foreclosure measures are up 15% from July to August, they are still 44% below pre-pandemic levels, according to Black Knight, a mortgage software and analytics company.

Credit availability has fallen further for mega-loans, which more borrowers have to use today due to rising home prices, according to the Mortgage Bankers Association. higher prices Also, more borrowers are turning to adjustable rate mortgages, because they offer lower interest rates. These loan rates can be fixed for up to 10 years, but they are considered riskier mortgages.

It is clear that borrowers are worried that mortgage rates will move higher. While mortgage rates do not exactly follow the federal funds rate, they are heavily influenced by Fed policy.

“The Fed is determined to raise interest rates as much as possible and hold them for as long as possible, even if that means the economy is suffering,” Matthew Graham, COO of Mortgage News Daily, wrote on his website.

Graham noted that the Fed is not thinking about mortgage rates or the housing market because home prices are too high and the correction is “good and necessary.”