US Primary Mortgage Rate Rises from 2.65% to 5% in 15 Months... Signs of Cooling in the Housing Market

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[Asia Economy Reporter Kim Hyunjung] The US housing market is showing signs of cooling as mortgage rates surpass 5%, the Wall Street Journal (WSJ) reported on the 14th (local time).

According to WSJ, Freddie Mac, a government-sponsored mortgage company, reported that the average 30-year fixed mortgage rate reached 5%. This is the first time in over a decade since 2011 that the rate has hit the 5% range, marking a 0.28 percentage point increase from 4.72% a week earlier. The day before, the Mortgage Bankers Association (MBA) also announced that the 30-year fixed mortgage rate for the week of the 2nd to 8th reached 5.13%, the highest since November 2018.

Until January last year, Freddie Mac's mortgage rate was at a record low of 2.65%. In just 15 months, it has nearly doubled.

According to S&P CoreLogic Case-Shiller, the national home price index in January this year rose 19.2% compared to a year ago, maintaining an upward trend, but loan demand is sharply declining. This is because the Federal Reserve's rate hikes to combat inflation are expected to lead to further increases in mortgage rates.

Concerns are emerging that the real estate market will cool due to rising rates. Previously, the US housing market experienced its biggest boom since 2006, driven by low mortgage rates and increased demand for large and suburban homes due to remote work. The millennial generation entering the market with purchasing power also contributed to the buying spree.

However, Wells Fargo, the largest mortgage issuer in the US last year, announced that its mortgage loan performance dropped 27% compared to a year ago. Another major lender, JP Morgan Chase, reported a 37% decrease in mortgage performance the day before. The Mortgage Bankers Association's refinancing index plunged 62% year-over-year. Eugene Richard, a representative of Spruce Mortgage, a mortgage brokerage, said, "The market is showing signs of cooling," diagnosing that "rising rates are thinning the pool of buyers."

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