Mortgage rates have reached their highest level in twenty years, with the average 30-year fixed loan now standing at 7.09 percent as of Thursday.
According to data published by Freddie Mac, this is the highest rate since April 2002, although it fell just short at 7.08 percent last November.
In the past 18 months, mortgage rates have more than doubled due to the Federal Reserve’s repeated hikes of its key funds rate to control inflation. The most recent hike in late July pushed the key rate up by 0.25 percent. Although mortgage rates can fluctuate independently, they generally move in tandem with the Fed’s actions over time.
These higher rates have made it more expensive for average Americans to afford new homes, resulting in hundreds of dollars being added to monthly mortgage payments.
Calculate how much more mortgages will cost as interest rates rise
Despite a slowdown in buying activity, housing prices remain high, and buyers face tough competition and a shortage of affordable homes in many areas. Meanwhile, homeowners who secured lower rates are hesitant to sell.
Freddie Mac’s chief economist, Sam Khater, explains, “Demand has been impacted by affordability challenges, but the main cause of stalled home sales is the low inventory.”
It remains uncertain whether the Federal Reserve will continue to raise rates or how long they will remain high.
Analyst Jeff Ostrowski suggests that home buyers should not lose hope, as rates reached as high as 18 percent in the 1980s. He notes, “High rates pose a challenge, but it’s important to remember that Americans were buying homes before the era of super low rates.”
