published : 2023-09-29

Mortgage Rates Reach Near 23-Year High, Fueling Concern

Average 30-year fixed-rate mortgage at 7.31%, highest in two decades

A photograph of a couple discussing mortgage rates while holding a house key. Taken with a Canon EOS 5D Mark IV.

The average rate on the benchmark 30-year fixed mortgage has surged to its highest level in nearly 23 years.

According to Freddie Mac's latest Primary Mortgage Market Survey, the average rate for a 30-year fixed note climbed to 7.31%, up from 7.19% last week and 6.7% a year ago.

This sharp increase in mortgage rates is causing both buyers and sellers to hold out for better circumstances.

However, unlike the previous high rates in the year 2000, house prices are also rising, primarily due to low inventory.

The combination of high mortgage rates and rising house prices is creating headwinds in the housing market.

As a result, pending home sales in the U.S. have tumbled by 7.1%.

A close-up shot of a chart showing the rise in average mortgage rates over time. Taken with a Nikon D850.

Many consumers are finding themselves priced out of the market or experiencing sticker shock.

The median monthly mortgage payment has soared to an all-time high of $2,632.

Simultaneously, homeowners who locked in at lower mortgage rates are choosing to stay put.

This is contributing further to the ongoing inventory shortage and driving up home prices.

The Federal Reserve's aggressive tightening campaign has played a significant role in cooling the interest rate-sensitive housing market.

With policymakers signaling the possibility of another rate hike this year, mortgage rates are likely to remain elevated for the foreseeable future.

An aerial view of a suburban neighborhood with 'For Sale' signs scattered throughout. Taken with a Sony Alpha a7 III.

The upcoming weeks will reveal whether the increase in newly listed homes comes from sellers capitulating to current rate conditions or a sense of urgency to act before rates climb even higher.

There are signs suggesting that acceptance of higher rates may emerge as a trend with sticking power.

Only time will tell how the market will respond.

These developments have the potential to impact the views of buyers, sellers, and homeowners, as they navigate through the complexities of the real estate landscape.

The ongoing rise in mortgage rates requires careful attention and consideration from all parties involved.