Each Quarter Point Mortgage Rate Increase Pricing 1.3M Households Out of Market

The average conforming 30-year fixed rate lately has moved to the lowest levels since early February for most lenders. Mortgage Daily News reported the rate at 6.38 on Friday.

“In nuts-and-bolts terms, that’s a drop of more than half a percent,” according to Mortgage Daily News.

The drop came in the middle of last week with Wednesday accounting for a much larger portion of the improvement as lenders continued updating their offerings in response to Wednesday afternoon’s bond market movement – courtesy of the Fed).

National Association of Home Builders recently reported that in today’s interest rate environment, a quarter-point rise in mortgage rates would price approximately 1.3 million households out of the market for a new home with an estimated median price of $425,786.

NAHB said that interest rate hikes by the Federal Reserve will put upward pressure on mortgage rates.

Rising mortgage interest rates require higher household income thresholds to qualify for a mortgage. In other words, a quarter-point rate hike would force potential buyers to set their sights on a house selling lower than a median-priced home.

When interest rates increase from 6.25% to 6.5%, approximately 1.28 million households can no longer afford to buy a median-priced new home. An increase from 6.5% to 7% prices approximately 1.29 million more households out of the market.