Mortgage rates have surged this week, moving up by more than half a percentage point.
Figures shown in FreddieMac’s Primary Mortgage Market Survey (PMMS), show that as of June 16, the average rate on a 30-year loan is now 5.78%, rising from 5.23%.
Mortgage Rates Make Historically Biggest Weekly Jump – Highest Since 2008
The mortgage rate rise comes as the Federal Reserve delivered the largest interest rate increase in decades, as a means of fighting inflation.
A report in Fox News says the rate puts mortgages at their highest level since 2009, 13 years ago.
Interest Rate Rise and Small Businesses
An increase in interest rates can impact small businesses in a number of ways. Customers with debt can have less money to spend because they are paying higher levels of interest to lenders. This can impact small businesses, as sales fall as a result. Small businesses are often forced to react by taking steps like increasing their prices to accommodate for less consumer spending.
Additionally, small businesses with loans, such as a mortgage on commercial premises or a business loan, find their expenses increasing, as they now have to pay more interest. Again, this can impact business operations, as the company finds it either needs to make cuts to spending, must put their prices up, or both.
Largest One-Week Increase
Sam Khater, Chief Economist at Freddie Mac, commented on the reasons behind the interest rate rise:
“Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987.
“These higher rates are the result of a shift in expectations about inflation and the course of monetary policy. Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market,” Khater continued.
Freddie Mac’s new figures show that as the week of June 16, 2022, the average 30-year mortgage term was 5.78%. The average rate on a 15-year mortgage, which is the most popular term for borrowing among homeowners, increased to 4.81%, up from 4.38% the previous week. This compares to one year ago, when the average rate for a 150year mortgage was just 2.24%.
‘Eroding Americans’ Purchasing Power’
Fox New’s report also contends that inflation s “rapidly eroding Americans’ purchasing power.” Analysis shows that higher prices are costing households in the US an extra $460 a month, on average.
Small businesses would be wise to keep up to date with the latest figures relating to mortgage rates and wider interest rates. Knowing how their business may be impacted by climbing costs will put small business owners in a better position to act accordingly to help navigate challenging times.
This article, “Mortgage Rates Make Historically Biggest Weekly Jump – Highest Since 2008” was first published on Small Business Trends