The average rate on a 30-year fixed rate mortgage was 5.66% in the week ending September 1, up from 5.55% the week before, according to Freddie Mac. This is significantly higher than last year’s 2.87%.
After starting the year at 3.22%, mortgage rates surged in the first half of the year, reaching a high of 5.81% in mid-June. But since then, concerns about the economy and the Federal Reserve’s anti-inflation mandate have made them more volatile.
“Mortgage rates have almost doubled from a year ago, with the market’s renewed perception of a more aggressive monetary policy stance,” said Sam Cater, chief economist at Freddie Mac.
This could further slow home sales and put downward pressure on prices.
“Rising mortgage rates come at a particularly vulnerable time for the housing market, as sellers are readjusting prices due to lower purchase demand,” he said.
Mortgage rates rose after the 10-year US Treasury returned to levels not seen since June.
The Federal Reserve does not set the interest rates that mortgage borrowers pay directly, but its actions affect them. Instead, mortgage rates tend to track 10-year Treasuries I have. When investors see or anticipate a rate hike, they often sell government bonds, which drives up yields and increases mortgage rates.
“Financial markets continue to respond to the Federal Reserve’s firm commitment to tighten monetary policy to bring inflation closer to 2%,” said George Latiou, economic research manager at Realtor.com.
As a result, homebuyers can expect mortgage rates to remain in the 5% to 6% range for the next few months, he said. With inflation still high and his Fed’s rising cost of borrowing, interest rates will continue to rise.
A year ago, buyers who paid a median $390,000 home with a 20% down payment and the rest with a 30-year fixed-rate mortgage with an average interest rate of 2.87% reported monthly mortgage payments of was $1,294. From Freddie Mac.
Today, a homeowner buying a similarly priced home at an average interest rate of 5.66% would pay $1,803 a month in principal and interest. That’s $509 more each month, according to Freddie Mac’s data.
If there’s a silver lining for those still looking for homes, it’s that homes are staying on the market longer, prompting sellers to lower their asking prices, leaving room for negotiation, Ratiu said. Stated.
“As we head into fall and the pace of sales slows further, some buyers may find that discounts are larger, offering opportunities to stay within budget,” he said.