Mortgage rates rose again this week, above 7% for the first time since 2002.
Average yields on 30-year fixed-rate mortgages were 7.08% in the week ending Oct. 27, up from 6.94% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.14%.
The last time the average rate exceeded 7% was in April 2002.
Mortgage rates have been rising almost every week since late August and have more than doubled since the beginning of the year.
The rapid rise was accelerated by the US Federal Reserve (Fed)’s unprecedented interest rate hike campaign. soaring inflationCentral bank rate hikes, a combination of investor concerns recession Various economic news has also made mortgage rates increasingly volatile over the past few months.
Freddie Mac chief economist Sam Cater said rising interest rates are leading to a slump in the housing market.
“Consumers are seeing higher costs everywhere as inflation continues, further reducing consumer confidence this month,” Khater said. “Many potential homebuyers are choosing to wait and see where the housing market ends up, further pushing down demand and home prices.”
According to Freddie Mac, the average mortgage interest rate is based on a survey of traditional homebuying loans to high-credit borrowers with a 20% down payment. However, many buyers with lower upfront payments or less than perfect credit will pay more.
The Federal Reserve does not directly set the rate borrowers pay on mortgages, but its actions affect them. is in When investors see or anticipate rate hikes, yields move higher and mortgage rates move higher.
Yields on 10-year yields climbed above 4% this week, the highest level since 2008.
Realtor.com economic data analyst Hannah Jones said investors expected another rate hike by the Federal Reserve next week.
Analysts expect the central bank to announce another 75 basis points rate hike. That would be his fourth consecutive 75-basis-point rate hike, the largest string of his Fed rate hikes in over 30 years.
Rising mortgage rates are making it even harder for prospective buyers to afford a home.
Over the past year, mortgage rates have risen nearly 4% and listed prices have risen 13.9%. According to Realtor.com, this has resulted in the median home’s monthly payment increasing by nearly 75% compared to a year ago.
Calculations show that at this point last year, a buyer who paid a 20% down payment on a $390,000 home and financed the rest with a 30-year fixed-rate mortgage with an average interest rate of 3.14% would have a monthly mortgage payment of It was $1,339. From Freddie Mac.
Today, if a homeowner bought a similarly priced home at an average interest rate of 7.08%, they would be paying $2,093 a month in principal and interest. An additional $754 each month.
“Home shoppers are plagued by rising home ownership costs and inflation, with many exiting the market,” said Jones. She pointed to her recent report on existing home sales. Down 23.8% YoY According to the National Association of Realtors, September marked the eighth straight month of slowdown.
Demand for mortgages has also fallen dramatically, with applications being posted at the slowest pace since 1997, according to the Mortgage Bankers Association.
Homebuyers who continue to search are finding affordable housing in the lower market, Jones said. “As a result, we are seeing sustained housing demand in the affordable market.”
But as long as mortgage rates and prices remain high, many buyers will remain on the sidelines or scale back their expectations.
“Some people think renting is a better option in the short term, while others are looking at other types of housing, such as condos,” Jones said. , we need to be aware of the impact of higher mortgage rates on housing costs, but it could have some impact with lower prices compared to past months.”