The 30-year fixed mortgage rate has peaked in over two decades, as revealed by Freddie Mac this Thursday.
According to Freddie Mac’s most recent Primary Mortgage Market Survey, the benchmark 30-year fixed note rate surged 7.09 percent this week. The first-time mortgage rates reached this figure since 2002, exceeding 7 percent for the first time since November, after an increase from 6.96 percent the preceding week. The average 30-year fixed rate was 5.13 percent during the same period last year.
Similarly, the rate for a 15-year fixed mortgage experienced a rise, reaching an average of 6.46 percent this week, up from 6.34 percent the week before. One year earlier, the average for a 15-year fixed note stood at 4.55 percent.
Sam Khater, Freddie Mac’s chief economist, commented on the situation, stating, “The economy is performing above predictions, and the 10-year Treasury yield’s increase has led to the escalation of mortgage rates.” He further noted that while demand is being affected by issues related to affordability, the main barrier to home sales is low inventory.
Highlighting the problem, a recent report from Realtor.com illustrated that the number of homes available in the market in June plummeted by more than 47 percent compared to the standard quantity before the onset of the COVID-19 pandemic in early 2020.
Last year, the Federal Reserve’s robust campaign to increase interest rates caused a significant spike in mortgage rates. Sellers who had secured low mortgage rates before the pandemic have been hesitant to sell and transition to a new property with a higher rate, consequently limiting options for prospective buyers.
Driven by high inflation, the Federal Reserve has elevated its benchmark interest rate on 11 occasions since March 2022, resulting in the fed funds rate reaching its zenith in 22 years.
On Thursday, Jiayi Xu, an economist at Realtor.com, commented on the prospect that rates might continue at elevated levels for the time to come. Xu stated, “Despite persistent high prices and escalated interest rates, data from July’s retail sales reveal that consumer spending is on a solid upward trend, buoyed by increased wage growth.”
Xu added that although this robust data may assuage immediate fears of a recession, it could also lead to worries that interest rates may remain high for a prolonged duration.
Furthermore, Xu emphasized the Federal Reserve’s cautious approach, noting that they carefully monitor the impact of previous rate hikes. Xu said, “In the upcoming FOMC (Federal Open Market Committee) meeting, the Fed might employ a ‘wait-and-see’ strategy once again, which could potentially dampen the recent rise in mortgage rates.”
This observation underscores the careful balancing act that the Federal Reserve is undertaking as it navigates the complexities of the current economic landscape.