It’s the fourth-straight week that the average 30-year fixed mortgage rate has increased, climbing up to 6.95%. This marks the highest level for mortgage rates since President Trump’s first full week into his second term late January last year.
A mortgage rate is the percentage of interest that is charged on a home loan. These rates change with the economic conditions happening in that country; however, the lender can offer the mortgage rate based on the buyer’s credit history and financial circumstances.
The buyer can also choose different loan terms, ranging from 10 years to 30 years. This means you would be making that monthly payment for that set amount of time your loan is good for. However, the mortgage rates are increasing no matter what loan term the buyer picks.
What does this increasing rate mean for new and potential homeowners? Well, even a 1% increase adds hundreds of dollars to monthly interest bills. Higher rates also mean that buyers can qualify for less on loans. This is true as purchase applications have fallen by 1% last week and mortgage applications dropped by 19%. The median age of a first-time home buyer has climbed up to 40 years old. Put simply, higher rates mean the affordable housing crisis will worsen for young adults.
Housing affordability continues to rank as a high issue for the American people, roughly one third of Americans are spending more than 30% of their income on rent and mortgage payments. The United States does not have enough housing to meet demand as construction on new homes has significantly fallen since the 2008 financial recession, and rising labor and materials costs have also kept the number of homes built at low levels. In Lancaster County, the change in price for a typical home has increased by 3.3% since 2020, marking the average home value at $366,223, according to the Zillow Home Value Index.
The Trump administration has deepened the housing crisis by withholding federal housing funds and cutting staff at the U.S. Department of Housing and Urban Development. Trump’s current tariffs on materials such as lumber, steel and kitchen and bathroom fixtures will add roughly $135 billion to the costs of residential housing construction over the next five years. Nearly one third of construction firms are being affected by immigration enforcement activities as immigrants make up over one-quarter of the construction workforce.
During Trump’s 2024 presidential campaign, he promised to lower mortgage rates and improve housing affordability. However, he continues to propose budget cuts to federal affordable housing programs and refused to sign a bipartisan housing bill back in June of this year. The housing bill still passed and became law without his signature, yet with Trump’s mixed support on the issue, many Americans are concerned that the president won’t provide true support to the housing crisis.
With mortgage rates still increasing with no sign of decline, the Iran war and Trump’s tariffs increasing the prices of materials to construct new homes, it is safe to say new home buyers in the coming years will be greatly impacted with higher monthly payments.
