Mortgage rates in the U.S. rose, increasing borrowing costs as home prices extend their gains.
The average rate for a 30-year fixed mortgage was 4.29 percent this week, up from 4.22 percent, Freddie Mac said in a statement today. The average 15-year rate rose to 3.3 percent from 3.27 percent.
Home values have increased as buyers compete for a limited supply of listings and distressed properties make up a smaller share of purchases. While housing demand remains strong, price growth will begin to ebb in part because of tight credit, sluggish income growth and mortgage rates that are higher than a year ago, said Stephanie Karol and Patrick Newport, U.S. economists at IHS Global Insight in Lexington, Massachusetts.
“These conditions present temporary challenges for the housing market,” Karol and Newport said yesterday in a research note. “We expect home prices to decelerate, but growth should continue into next year.”
Home prices jumped 13.3 percent in the year through September, according to the S&P/Case-Shiller 20-city index, released yesterday. The gauge is a lagging indicator because it’s based on contracts signed months earlier.
The Federal Housing Finance Agency said values climbed 0.3 percent in September, the smallest monthly gain in a year.
Price increases and a jump in borrowing costs to a two-year high in August have caused some would-be buyers to hold back. Contracts to buy previously owned U.S. houses dropped for a fifth straight month in October, the National Association of Realtors said last week.
The 30-year average was 3.32 percent a year ago, close to a record low, according to Freddie Mac data. It surged to 4.58 percent in August, the highest since July 2011.