August 17, 2023 (UPI) — According to FreddieMac, the average interest rate for a 30-year fixed-rate mortgage in the United States is currently 7.09%, marking the highest rate seen in the past two decades.
The robust state of the U.S. economy is a major contributor to these rates, with high home prices impacting demand.
This figure represents an increase from last week’s rate of 6.96%. In comparison, the rate averaged 5.13% one year ago.
FreddieMac’s Chief Economist, Sam Khater, explains, “The economy continues to surpass expectations, and a rise in the 10-year Treasury yield has caused mortgage rates to climb. The last time the 30-year fixed-rate mortgage surpassed seven percent was in November of last year. While affordability challenges have impacted demand, the primary factor behind stagnant home sales remains the low inventory.”
For 15-year fixed rate mortgages, the average rate currently stands at 6.46%, up from 6.34% the previous week. This represents a significant rise from the 4.55% rate observed a year ago.
On Wednesday, the Mortgage Bankers Association reported a 0.8% decrease in mortgage applications.
Furthermore, new single-family home construction experienced a contraction in August. The National Association of Home Builders attributes this decline to high loan rates and persistently high inflation in the housing sector.
While inflation and the dynamic between demand and limited supply have driven up home prices, the Federal Reserve’s multiple rate hikes, which were intended to combat inflation, have ultimately resulted in higher mortgage interest rates.
According to the National Association of Realtors, existing home sales in 2023 have declined by 18.9% compared to the previous year. The NAR’s data also indicates that the median price for existing homes reached $410,200, marking the second-highest median price ever recorded.
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