US five-year adjustable-rate mortgage reaches highest since 2011

THE average rate on a five-year adjustable mortgage jumped last week to the highest level in at least 12 years and fixed-rate mortgages also climbed, suggesting persistent housing affordability challenges.

The contract rate on an adjustable mortgage increased by more than a quarter of a percentage point to 6.59 per cent, the highest in Mortgage Bankers Association (MBA) data back to early 2011. The 30-year fixed rate rose 6 basis points to 7.27 per cent in the week ended Sep 8, close to the highest level since late-2000.

While a gauge of mortgage applications for home purchases rose 1.3 per cent from a 28-year low the prior week, the data are prone to volatility around the holidays. The latest reporting period included Labor Day. On an unadjusted basis, the purchase applications index slid nearly 11 per cent.

Including a decline in refinancing activity, the overall measure of mortgage demand slipped 0.8 per cent to the lowest level since the end of 1996.

Housing affordability stands at a record low as limited inventory keeps home prices elevated, and higher borrowing costs make monthly payments more difficult.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75 per cent of all retail residential mortgage applications in the US. BLOOMBERG