Mortgage rates expected to rise to 5.3 percent in 2014

The recent spike in mortgage rates has begun to take a toll on the housing recovery, with purchase loan applications, pending home sales and new-home sales recently falling, according to Fannie Mae’s latest Economic and Housing Outlook report.

Fannie Mae forecasts that the yield on the 30-year-fixed-rate mortgage should rise to about 5.3 percent by the end of 2013.

“Affordability, while remaining historically high, is becoming an issue for some potential homebuyers, especially first-time homebuyers, who are no longer able to qualify as mortgage rates spiked amid continued rising home prices and anemic income growth,” Fannie Mae said.

“The affordability index for first-time homebuyers fell sharply in the second quarter and will likely post another sizable drop in the current quarter.”

Source: Fannie Mae