Mortgage rates hit their highest level in two decades, with the average 30-year fixed loan coming in at 7.09 percent on Thursday.
Not since April 2002 have rates been this high, according to data published by Freddie Mac, although the average rate peaked at 7.08 percent last November.
Mortgage rates have more than doubled in the past 18 months as the Federal Reserve has raised its key funds rate repeatedly to get inflation under control. The most recent Fed rate hike came in late July, pushing its key rate up by 0.25 percent. Mortgage rates can fluctuate independently of the Fed’s actions, but they tend to move in tandem over time.
The higher rates have made it more expensive for the typical American to buy a new home – sometimes adding hundreds of dollars to a homeowner’s monthly payment.
Housing prices have remained elevated even as buying activity has slowed down. And buyers still face a competitive market with a dearth of affordable homes in many parts of the country. At the same time, homeowners who are locked into the lower rates are reluctant to leave.
“Demand has been impacted by affordability head winds, but low inventory remains the root cause of stalling home sales,” said Sam Khater, Freddie Mac’s chief economist.
It’s unclear whether the Fed will keep raising rates or how long they will stay at their elevated level.
Jeff Ostrowski, an analyst at Bankrate, suggested that home buyers should not give up hope, pointing out that rates climbed as high as 18 percent in the 1980s.
“High rates are challenging for home buyers, but it’s worth noting that Americans bought homes before the recent era of super low rates,” Ostrowski said.
(c) 2023, The Washington Post · Aaron Gregg
One word
Bidenomics