The average long-term mortgage rate in the US has risen above 7% this week, reaching its highest level since 2001. This increase poses a challenge for prospective homebuyers who are already grappling with soaring home prices and a limited supply of properties on the market. According to Freddie Mac, the average rate for a 30-year home loan has climbed to 7.23% from 7.09% last week, marking the fifth consecutive weekly increase. This rate is significantly higher than the average of 5.55% seen a year ago and is now at its highest since June 2001 when it was 7.24%.
The high mortgage rates can lead to hundreds of dollars in additional monthly costs for borrowers, making it more difficult for many Americans to afford a home. Furthermore, these rates dissuade homeowners who secured low rates two years ago from selling their properties. Sam Khater, Freddie Mac’s chief economist, stated, “This week, the 30-year fixed-rate mortgage reached its highest level since 2001 and indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term.”
Over the past two years, the average rate on a 30-year mortgage has more than doubled, rising from 2.87% to its current rate. This surge in rates has resulted in a shortage of available homes, as homeowners who previously locked in lower borrowing costs are now hesitant to sell their properties and enter into a higher rate on a new one. This is a major factor behind the nearly 21% drop in new home listings nationally in July compared to the previous year, according to Realtor.com.
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