The U.S. housing market has been dealt another blow as mortgage rates have risen to the highest level in 23 years. According to data released by Freddie Mac on September 28, the 30-year fixed-rate mortgage averaged 7.31%, marking a 12 basis point increase from the previous week. This is also the highest level of mortgage rates since December 2000.
Compared to a year ago, when the 30-year rate was averaging at 6.7%, the current rates are significantly higher. Similarly, the average rate on a 15-year mortgage has increased from 6.54% to 6.72% in just one week and was at 5.96% a year ago.
Freddie Mac’s weekly report is based on thousands of applications received from lenders across the country. These applications are submitted to Freddie Mac when borrowers apply for a mortgage.
A separate report from Mortgage News Daily states that as of Thursday afternoon, the 30-year fixed-rate mortgage was averaging at 7.65%.
Impact on Housing Market
Freddie Mac’s chief economist, Sam Khater, explains that unlike in the year 2000, when mortgage rates were similarly high, today’s house prices are rising alongside these rates due to low inventory. This combination of factors is causing both buyers and sellers to hold out for better circumstances.
The increase in mortgage rates in August has already had an impact on the housing market, pushing pending home sales down to the lowest level since April 2020. Additionally, the median price of an existing home currently stands at $407,100.
Affordability Challenges for Buyers
Industry experts, including Bob Broeksmit, president and CEO of the Mortgage Bankers Association, highlight the affordability challenges faced by prospective buyers with rates now exceeding 7% and a limited supply of homes for sale. Until rates start to decrease, it is anticipated that the housing market activity will remain slow.