Ryan Ratliff, center, real estate sales associate with Re/Max Advance Realty, shows Ryan Paredes, left, and Ariadna Paredes a home for sale in Cutler Bay, Florida, on April 20, 2023.
Joe Raedle | Getty Images
The average rate on the popular 30-year fixed mortgage surged to 7.72% on Tuesday, as reported by Mortgage News Daily.
Mortgage rates loosely follow the yield on the 10-year Treasury. This week, following strong economic data, the yield has been on an upward trend. These rates haven’t been seen since the end of 2000.
In the beginning of this year, the 30-year fixed rate plummeted to around 6%, sparking a surge in activity within the spring housing market. However, rates have been steadily rising throughout the summer, leading to decreased sales despite high demand. This upward trend seems likely to continue, with rates potentially exceeding 8%.
While the Federal Reserve refrained from raising interest rates two weeks ago, they did mention the possibility of another hike this year and fewer cuts next year than previously anticipated. Investors have been eagerly awaiting the release of economic data in the first week of October.
Matthew Graham, the chief operating officer at Mortgage News Daily, stated, “It is now the first week of October, and data has been stronger. Today’s JOLTS (job openings and labor turnover survey) report is the biggest confirmation so far this week, and it’s driving yields to new long-term highs. It may be a simple matter, but it is unfortunate for those who favor low rates.”
The rise in rates has significantly impacted affordability, affecting both the new and existing home sales markets. While builders previously benefitted from the limited supply of existing homes for sale, higher mortgage rates have become a major concern. Builder sentiment turned negative in September for the first time in five months.
To provide some perspective on rates, for a buyer purchasing a $400,000 home with a 20% down payment on a 30-year fixed loan, the current monthly payment is approximately $930 higher compared to when rates were at 3% during the height of the Covid-19 pandemic.
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