The average long-term mortgage rate climbed further above 7% this week to its highest level since 2001, one other blow to would-be homebuyers grappling with rising home prices and a stubbornly low supply of properties available on the market.
Mortgage buyer Freddie Mac said Thursday that the typical rate on the benchmark 30-year home loan climbed to 7.23% from 7.09% last week. A 12 months ago, the speed averaged 5.55%.
It’s the fifth consecutive weekly increase for the typical rate, which is now at its highest level since early June 2001, when it averaged 7.24%.
High rates can add lots of of dollars a month in costs for borrowers, limiting how much they will afford in a market already unaffordable to many Americans. They also discourage homeowners who locked in low rates two years ago from selling.
Mortgage rates have been rising together with the 10-year Treasury yield, utilized by lenders to cost rates on mortgages and other loans. The yield has been climbing as bond traders react to more reports showing the US economy stays remarkably resilient, which could keep upward pressure on inflation, giving the Federal Reserve reason to maintain rates of interest higher for longer.
“This week, the 30-year fixed-rate mortgage reached its highest level since 2001 and indications of ongoing economic strength will likely proceed to maintain upward pressure on rates within the short-term,” said Sam Khater, Freddie Mac’s chief economist.
High inflation drove the Federal Reserve to boost its benchmark rate of interest 11 times since March 2022, lifting the fed funds rate to the best level in 22 years.
Mortgage rates don’t necessarily mirror the Fed’s rate increases, but are likely to track the yield on the 10-year Treasury note. Investors’ expectations for future inflation, global demand for US Treasurys and what the Fed does with rates of interest can influence rates on home loans.
The average rate on a 30-year mortgage stays greater than double what it was two years ago, when it was just 2.87%. Those ultra-low rates spurred a wave of home sales and refinancing. The sharply higher rates now are contributing to a dearth of accessible homes, as homeowners who locked in those lower borrowing costs two years ago are actually reluctant to sell and jump into the next rate on a latest property. It’s a key reason latest home listings were down nearly 21% nationally in July from a 12 months earlier, in response to Realtor.com.
The lack of housing supply can be weighing on sales of previously occupied US homes, that are down 22.3% through the primary seven months of the 12 months versus the identical stretch in 2022.
The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, rose to six.55% from 6.46% last week. A 12 months ago, it averaged 4.85%, Freddie Mac said.