A modern home and an upward pointing arrow reflecting rising mortgage rates.
Illustration by Lanette Behiry/Real Estate News

Mortgage rates now three times higher than in 2021 

Economic signals appear to be keeping rates elevated as they climb for a fifth straight week.

October 12, 2023
2 minutes

Key points:

  • The 30-year rate averaged 7.57% this week in the Freddie Mac survey, remaining at a 23-year high.
  • Sticky inflation and a strong jobs report are signs that another rate hike is likely.
  • "When the dust settles," however, rates could land in the 6% range.

Mortgage interest rates rose for a fifth consecutive week, deepening the slumber that has overcome the housing market.

The 30-year fixed rate mortgage continues to sit at a 23-year high, averaging 7.57% this week. That's up from 7.49% a week ago, according to the latest Freddie Mac survey. The 15-year mortgage also rose to 6.89%.

And the latest economic data isn't showing signs that relief is coming anytime soon. Inflation held steady at 3.7% in September, still well above the Federal Reserve's 2% target rate, and the latest jobs report was strong — together, those indicators point to one more rate hike this year and "suggest that we should expect that rates will stay higher for longer," said Lisa Sturtevant, chief economist at Bright MLS.

"If the Federal Reserve is going to continue to be laser-focused on bringing down inflation to under 2%, housing will continue to be the stumbling block," Sturtevant said, adding that additional rate hikes will only hurt supply further. 

Interest rates may continue to trend upward in the short term: Mortgage News Daily reported that average daily rates for a 30-year mortgage jumped to 7.84% in its first reading on Oct. 12.

While some potential homebuyers are getting used to this new normal, many are remaining on the sidelines.

"Though buyers have shown signs of adjusting to the higher-rate environment, limited inventory has kept home prices elevated, cutting further into the buying power of shoppers hoping to find a suitable home," said Hannah Jones, senior economic research analyst at Realtor.com.

But rates may not stay in the 7% to 8% range long term. Sturtevant noted that in the early 2000s, prior to the financial crisis, average rates hovered around 6%, "and it is likely that is where we will end up when the dust settles." 

Mortgage applications increased slightly this week despite the high mortgage rates, according to the Mortgage Bankers Association. The 0.6% increase appears to be tied to demand for adjustable rate mortgages, as rates for those loan products dipped last week, said Joel Kan, MBA's chief economist.

Even with that slight uptick in applications, mortgage lenders are seeing much lower volumes compared to 2022.

"Application activity remains depressed and close to multi-decade lows, with purchase applications still almost 20 percent behind last year's pace," Kan said.

Get the latest real estate news delivered to your inbox.