Mortgage rates experienced a slight increase this week, putting an end to two consecutive weeks of decline. For five weeks in a row, rates have consistently remained above 7%, primarily due to persistent inflation pressure.
Based on data from Freddie Mac released on Thursday, the average 30-year fixed-rate mortgage was 7.18% in the week ending September 14, up from 7.12% the previous week. In comparison, the rate was 6.02% a year ago.
Consider the financial burden on potential homebuyers: At this week’s rate, it would cost $5,080 per month to borrow $750,000. A year ago, the same loan would have been $575 cheaper, representing a 13% decrease in cost.
“The reacceleration of inflation and the strength of the economy are the factors contributing to the elevated mortgage rates,” explained Sam Khater, the chief economist at Freddie Mac.
Freddie Mac determines the average mortgage rate based on applications received from thousands of lenders nationwide, only including borrowers who provide a 20% down payment and have excellent credit.
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However, the hopes within the real estate industry that the Federal Reserve may not raise rates any further might be unfounded, cautioned Mike Loewengart, the head of model portfolio construction at Morgan Stanley Global Investment Office.
“While it is likely that the Fed will keep rates unchanged next week, if the economy continues to exceed expectations, it is uncertain what their approach will be in their final two policy meetings of the year,” he stated.
In July, housing affordability in the US reached a record low as high mortgage rates and prices made homeownership unattainable for many Americans.
The National Association of Realtors’ housing affordability index remained unchanged at 87.8 in July, matching its lowest point since data collection began in 1989. A score of 100 signifies that a family with the median income has sufficient funds to qualify for a mortgage at the median home price.
According to the same report, the typical family spent 28.5% of its income on mortgage payments, also reaching an all-time high. In July, the qualifying income for a mortgage, with a 20% down payment, stood at a record $104,496.
This report includes contributions from The Associated Press, Bloomberg, and CNN.
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