Latest mortgage news: Rates blow past 7.5% as economy remains strong

The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
Mortgage rates punched through 7.5 percent this week, highest level since November 2000, according to Bankrate’s national survey.
The average rate on 30-year fixed mortgages jumped to 7.55 percent this week from 7.42 percent last week, according to Bankrate’s weekly national survey of large lenders.
The average rate on 30-year home loans last topped this level in November 2000, according to Bankrate research. That was before the Sept. 11 terror attacks led the Federal Reserve to slash interest rates, and well before the Great Recession spurred the Fed to keep rates low.
More recently, mortgage rates briefly breached 7 percent in late 2022, but they pulled back this year as the smart money bet on an economic downturn. The current run-up in mortgage rates reflects a variety of factors: a resilient U.S. economy, the Fed’s ongoing war on inflation and a sharp rise in 10-year Treasury yields, which serve as an informal benchmark for 30-year mortgage rates.
What happened to mortgage rates this week
The 30-year fixed mortgages in this week’s survey had an average total of 0.35 discount and origination points.
Over the past 52 weeks, the benchmark 30-year fixed-rate mortgage has averaged 6.82 percent. A year ago, the 30-year fixed-rate mortgage was 6.73 percent. Four weeks ago, that rate was 7.32 percent. The 30-year fixed-rate average for this week is 1.25 percentage points higher than the 52-week low of 6.3 percent.
As for other loans:
- The 15-year fixed-rate mortgage was 6.89 percent, up from 6.75 from last week.
- The 5/6 adjustable-rate mortgage (ARM) stood at 7.27 percent, up from 7.26 percent a week ago.
- The 30-year fixed-rate jumbo mortgage was 7.41 percent, up from 7.23 percent last week.
How mortgage rates affect home affordability
The national median family income for 2023 is $96,300, according to the U.S. Department of Housing and Urban Development, and the median price of an existing home sold in August 2023 was $407,100, according to the National Association of Realtors. Based on a 20 percent down payment and a mortgage rate of 7.55 percent, the monthly payment of $2,288 amounts to 29 percent of the typical family’s monthly income.
A year ago, the median family income was $90,000, the median home price was $391,700 and the average mortgage rate was 6.73 percent. Buying the typical home then required 27 percent of a family’s monthly income.
The sharp rise in mortgage rates has squeezed affordability and sparked a slowdown in home sales. First-time buyers are especially challenged by this market. Home prices haven’t fallen significantly — and values are unlikely to decline, given the shortage of homes for sale. Facing this affordability crunch, some borrowers are opting for ARMs now, even though the savings are small.
There is a possibility that home prices finally could take a breather, says Lisa Sturtevant, chief economist at Bright MLS, a large listing service in the Mid-Atlantic region. “We may be at a tipping point this fall where buyers bow out of the market amidst record low affordability and mortgage rates at a near two-decade high,” she says. “With a contraction in demand, expect home prices to fall in some markets. Supply will still be low, however, so price declines likely will be modest.”
Where mortgage rates are headed
Economists expected to see mortgage rates decrease by the end of 2023 as the Fed’s round of rate hikes draws to an end, but the strength of the U.S. economy has thrown a wrinkle into those expectations. So has the jump in 10-year Treasury yields. They climbed to 4.63 percent on Wednesday as investors decided the Fed won’t cut rates any time soon.
“Based on the [Federal Open Market Committee’s] most recent projections, rates are expected to be higher for longer, which drove the increase in Treasury yields,” said Joel Kan, deputy chief economist at the Mortgage Bankers Association.
Mortgage rates remain chained to inflation, a metric the Fed has been moving to control. At its September meeting, the central bank opted to keep rates unchanged. While the Fed doesn’t directly set fixed mortgage rates, it does set the tone of the interest-rate environment– and as the central bank has boosted its policy rate from zero in early 2022 to a range of 5.25 percent to 5.5 percent now, mortgage rates have followed suit.
Methodology
The Bankrate.com national survey of large lenders is conducted weekly. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the Bankrate.com national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We’ve conducted this survey in the same manner for more than 30 years, and because it’s consistently done the way it is, it gives an accurate national apples-to-apples comparison. Our rates differ from other national surveys, in particular Freddie Mac’s weekly published rates. Each week Freddie Mac surveys lenders on the rates and points based on first-lien prime conventional conforming home purchase mortgages with a loan-to-value of 80 percent. “Lenders surveyed each week are a mix of lender types — thrifts, credit unions, commercial banks and mortgage lending companies — is roughly proportional to the level of mortgage business that each type commands nationwide,” according to Freddie Mac.
Related Articles




Related Articles

Mortgage rate forecast September 2023: More volatility until the Fed weighs in


