Mortgage rates reach a new high for 2023
At 6.81%, the weekly average for a 30-year fixed-rate mortgage is the highest level seen since last fall, when rates spiked above 7%.
- While the economy is expected to cool in the second half of 2023, mortgage rates in the 6.5% range may be the new normal.
- Applications for home loans continue to decline, and many buyers fear they'll be priced out of the market for some time.
Buyers hoping to catch a break this week will have to keep waiting. Mortgage interest rates rose again, hitting the highest level of the year so far.
The 30-year fixed-rate mortgage averaged 6.81% this week, according to the latest Freddie Mac survey — a significant jump from last week's average of 6.71%.
"This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve," said Sam Khater, Freddie Mac's chief economist. "These high rates combined with low inventory continue to price many potential homebuyers out of the market."
It's the highest fixed-rate average since November, when rates peaked above 7% and inventory rose briefly as buyers backed out of the market.
The economy is still expected to cool in the second half of 2023 when the Fed resumes its pattern of rate hikes, but potential buyers will need to contend with the new normal of 6.5% or higher mortgage rates for a while, said Lisa Sturtevant, chief economist for Bright MLS.
"With affordability at near-record lows and inventory still very limited, buyers will continue to find the market challenging in the second half of 2023," Sturtevant said, adding that home shoppers will have to compromise on the features they want in a home.
Realtor.com economist Jiayi Xu noted that buyers may struggle into next year as well if rates continue to rise or remain elevated. A recent Realtor.com survey found that 78% of home shoppers intending to buy in the next year believe they'll be priced out of the market if home prices and mortgage rates keep rising.
Mortgage applications were down 4.4% compared to the week before, according to the Mortgage Bankers Association. That's the lowest level in the past month and down 22% from a year ago.
The average loan size also fell to a six-month low, likely due to more activity in the lower price tiers as buyers search for affordable options, said Joel Kan, MBA's deputy chief economist.
The 15-year fixed-rate mortgage averaged 6.24% this week, a big jump from last week's average of 6.06%.