LOS ANGELES– Borrowing costs for home loans rose again this week, pushing the average long-term mortgage rate in the United States to its highest level in nearly 23 years, another blow to would-be buyers facing a tough housing market. increasingly unaffordable.
The average rate on the benchmark 30-year home loan rose to 7.31% from 7.19% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.70%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, have also increased. The average rate rose to 6.72% from 6.54% last week. A year ago, it averaged 5.96%, Freddie Mac said.
“The 30-year fixed-rate mortgage has reached its highest level since 2000,” said Sam Khater, Freddie Mac’s chief economist. “However, unlike at the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds cause buyers and sellers to wait for better circumstances.
High rates can add hundreds of dollars per month to costs for borrowers, limiting their means in a market already out of reach for many Americans. They also discourage homeowners who got extremely low rates two years ago from selling. The average rate for a 30-year mortgage is now more than double what it was two years ago, when it was just 3.01%.
The combination of high rates and low housing inventory has worsened the affordability crisis by keeping housing prices near historic highs, even as sales of previously occupied U.S. homes fell 21% over the past eight years. first months of this year compared to the same period in 2022.
This is the third week in a row that mortgage rates have increased. The average weekly rate on a 30-year mortgage has remained above 7% since mid-August and is now at its highest level since mid-December 2000, when it averaged 7.42%.
Mortgage rates have risen along with the 10-year Treasury yield, which lenders use as a guide in pricing loans. The yield has jumped in recent weeks on concerns that the Federal Reserve will keep short-term interest rates higher for longer to combat inflation.
The central bank has already cut its main interest rate to the highest level since 2001 in hopes of dousing high inflation, and it indicated last week that it might cut rates next year by less. extent than expected.
The threat of a prolonged rise in rates has pushed Treasury yields to levels not seen in more than a decade. The yield on the 10-year Treasury was 4.61% as of midday Wednesday. It was around 3.50% in May and just 0.50% at the start of the pandemic.
Although mortgage rates don’t necessarily reflect Fed rate hikes, they tend to follow the yield on 10-year Treasury notes. Investor expectations about future inflation, global demand for U.S. Treasuries, and the Fed’s interest rate policy can influence home loan rates.