The average interest rate on the popular 30-year fixed-rate mortgage rose to 7.72% on Tuesday, according to Mortgage News Daily.
Mortgage interest rates are loosely based on the return 10-year Treasury Department, which rose this week following strong economic data. Interest rates haven’t been this high since the end of 2000.
Earlier this year, the 30-year fixed rate fell to about 6%, leading to a brief burst of activity in the housing market in the spring. However, over the course of the summer the price rose steadily again, which led to a decline in sales despite strong demand. The current trend appears to be even higher, with the possibility of interest rates exceeding 8%.
The Federal Reserve didn’t raise interest rates two weeks ago, but hinted at the possibility of another rate hike this year and fewer rate cuts than expected next year. Investors awaited the results of economic data in the first week of October.
“It is now the first week of October and the data is better,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “This morning’s JOLTS (job vacancies and labor turnover survey) is the biggest and worst confirmation of the week so far, pushing yields to new long-term highs. It’s actually a pretty simple thing, even if it’s unpleasant and unfortunate for fans of low interest rates.”
Higher interest rates have affected affordability and affected both the market for sales of new and existing homes. While builders benefited from the tight supply of existing homes for sale, higher mortgage rates are now a major concern. Builder sentiment slipped into negative territory in September for the first time in five months.
To put interest rates into perspective, for a borrower buying a $400,000 home with a 20% down payment on a 30-year fixed loan, the monthly payment is about $930 more today than it was then , when interest rates were at 3% at the height of the Corona-19 pandemic.