The recent increase in the 30-year mortgage interest rate translates to higher monthly payments for individuals seeking to secure home loans.
As reported by the Mortgage Bankers Association, mortgage rates have experienced a notable shift, surpassing the previous high of 7% to reach a new threshold of 7.16% by the conclusion of the final week in August. This upward movement is evident in both fixed and adjustable mortgage rates, reflective of the sustained vigour in the economy.
This marks the third consecutive week of such rate increases, elevating the 30-year fixed-rate mortgage to its highest point in over two decades. Consequently, prospective homebuyers are demonstrating a growing inclination toward government-backed securities, while adjustable-rate mortgages remain comparatively more favourable.
Fluctuations in Mortgage Rates
In the time frame between the year 2000 and the recent rate adjustment this month, the historical average mortgage rate held steady at 5.14%. Starting in the early 2000s at 8%, mortgage rates gradually declined to about 5% by the end of the summer of 2003.
Following that, leading up to the close of 2008, rates climbed from 5% to 6.5%. This increase was attributed to the Federal Reserve's response to the Great Recession by lowering the benchmark rate. From then on, mortgage rates have continued to see a gradual upward trend, persisting through the present year.
Between 2010 and the onset of the COVID-19 pandemic, rates generally remained at or below 5%. The pandemic marked another phase of near-zero rates set by the Fed. In January 2021, the 30-year fixed mortgage rate hit record lows, enabling millions of homeowners to refinance to sub-3% rates and attracting buyers into the market.
Since 10 months after then, the rates have stayed at the inclination from 6% to 7% range bringing the average 30-year fixed rate at 7.16% at the present time. All the data has shown that mortgage rates are at their highest levels since 2001.
Mortgage Rates Prediction for September 2023
So, what should we expect next? Mortgage rates had previously been expected to gradually fall below 6% during 2023, but they’ve stayed high as the economy manages to defy the expectations of a recession. So rates are still expected to stay above 6% until 2024.
In early 2023, lots of experts thought the U.S. economy might go into a tough time called a recession by the end of the year. This was because the Federal Reserve, which manages money, was being really strict with its policies and was raising interest rates, which could slow down the economy. People guessed that if the economy slowed down, the Federal Reserve might decide to be less strict and lower the interest rates later. This could have made it easier for people to get mortgages at lower interest rates.
Mortgage Rates Surge to 7.09% - Impact on Housing Market and Homeowners' Behavior
(Source:- Statista)
The dynamic trajectory of 30-year fixed mortgage rates between 2021 and 2023, showcased a notable increase from around 5.13% to 7.09%, reflecting the shifting landscape of the housing market and lending environment during this period.
The average 30-year fixed-rate mortgage, a popular type of home loan in the US, recently rose to 7.09% from 6.96% the previous week, and it was significantly higher compared to 5.13% a year ago.
Experts predict that these mortgage rates will likely stay high for the near future and might only start decreasing slightly by the end of the year. This current rate is the highest recorded since April 2002, marking a shift from years of declining rates that even went below 3% during the beginning of the pandemic.
The rise in mortgage rates, prompted by the Federal Reserve's efforts to curb inflation through interest rate hikes, has led to a slowdown in the housing market as homeowners with lower mortgage rates are reluctant to sell their homes.
This is reflected in the nearly 19% drop in sales of existing homes in June compared to the previous year, according to the National Association of Realtors. The limited availability of homes for sale has contributed to the persistence of elevated housing prices, with the median price of an existing home reaching $410,200 in June, the second-highest on record since data tracking began in 1999, and only slightly down from the peak of $413,800 observed a year earlier.
