Freddie Mac: Mortgage interest rate hits 20-year high
The average 30-year rate crossed the 7% threshold this week, the highest rate since April 2002.
- Inflation continues to be a challenge, causing buyers to remain cautious.
- The rising rate is expected to be more impactful to minority groups.
The 30-year fixed-rate mortgage hit a new milestone this week, rising above 7% for the first time in more than two decades.
Freddie Mac reported that the rate averaged 7.08%, a number not seen since April 2002.
“As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month. In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward,” said Sam Khater, Freddie Mac’s chief economist.
The sudden rise in interest rates has led to a situation where those who took out a mortgage loan in 2020 or 2021 would be reluctant to sell and swap it out for the current rate. A year ago, the 30-year mortgage rate averaged 3.14%.
While a little lower, the 15-year mortgage isn’t offering much relief. This week the average rate was 6.36%.
It’s an unusual period as the government continues to try and curb inflation.
“Generally, during inflationary periods, people hold less money and thus spend less. However, that’s not currently the case,” said Nadia Evangelou, senior economist at the National Association of Realtors. “Amid elevated inflation and higher interest rates, the U.S. economy grew more than expected, easing inflation fears for the time being. As a result, mortgage rates surpassed the 7% threshold this week.”
Evangelou noted that with monthly mortgage payments rising in some cases by $1,000, minority groups may be impacted more heavily.
“With 7% mortgage rates, only 15% of Black households can currently afford to buy the typical home compared to 30% of white households. Thus, Black families may fall further behind in homeownership compared to their white counterparts,” Evangelou said.
Write to Dave Gallagher.