Mortgage Rates Reach 21-Year High at 7.72%
In a recent development, the average rate on the 30-year fixed mortgage has surged to its highest level in over two decades, reaching a staggering 7.72%. This information comes courtesy of Mortgage News Daily, a leading mortgage industry news platform.
The increase in mortgage rates can be attributed to the climbing yield on the 10-year Treasury, which has experienced a notable ascent throughout the week. Economic data indicating growth and stability has further fueled this ascent, contributing to the surge in mortgage rates. In fact, rates have not been this high since the end of 2000.
At the beginning of this year, the 30-year fixed rate had dropped to approximately 6%, leading to a brief surge in activity within the spring housing market. However, rates have steadily risen over the summer, prompting a decline in sales despite strong demand. If the current trend continues, there is a possibility that rates may even surpass 8%.
While the Federal Reserve opted not to raise interest rates in the previous two weeks, it hinted at the possibility of future hikes this year and fewer cuts next year. Investors have eagerly awaited the release of economic data in the first week of October for further insights.
The impact of these soaring rates has been particularly felt in the affordability of homes, impacting both new and existing-home sales markets. Builders who initially benefited from the limited supply of existing homes on the market are now grappling with the concerns surrounding higher mortgage rates. This sentiment is reflected in the builder sentiment index, which slipped into negative territory in September for the first time in five months.
To put these rates into perspective, let’s consider a borrower purchasing a $400,000 home with a 20% down payment on a 30-year fixed loan. Currently, the monthly payment is approximately $930 more than it would have been when rates were at a low of 3% during the height of the pandemic.
Matthew Graham, the chief operating officer at Mortgage News Daily, summed up the situation, saying, “This morning’s JOLTS (job openings and labor turnover survey) is the biggest, baddest confirmation so far this week, and it’s pushing yields to fresh long-term highs. Pretty simple stuff, actually, even if unpleasant and unfortunate for fans of low rates.”
As the mortgage rates continue to rise, prospective homebuyers and industry experts will watch closely to see how the market responds and whether the trend continues unabated.