US Mortgage Rates Rise to 7.49%, Highest Level Since 2000

U.S. mortgage rates climbed again this week to their highest level since December 2000, the Federal Home Loan Mortgage Corporation, or Freddie Mac, said Thursday.

The average rate on a 30-year fixed-rate mortgage rose to 7.49%, up from 7.31% last week, and up from 6.66% a year ago, according to Freddie Mac’s Primary Mortgage Market Survey.

The average rate on a 15-year home loan rose to 6.78%, up from 6.72% last week, and up from 5.90% a year ago.

Mortgage rates maintained their upward trajectory as the 10-year Treasury yield, a key benchmark, climbed, Sam Khater, Freddie Macs Chief Economist, said in a statement. Several factors, including shifts in inflation, the job market and uncertainty around the Federal Reserves next move, are contributing to the highest mortgage rates in a generation. Unsurprisingly, this is pulling back homebuyer demand.

Mortgage applications have been steadily decreasing as rates have climbed to the highest level in nearly 23 years, according to the latest weekly survey from the Mortgage Bankers Association. For the week ending Sept. 29, applications declined 6% from the week before, according to the MBA.

Thanks to high rates, mortgage applications grounded to a halt, dropping to the lowest level since 1996, Joel Kan, MBAs Vice President and Deputy Chief Economist, said in a statement.

People shouldn’t expect residential home prices to come down quickly. We have a log jam in the real estate market that may last for some time. Families that have equity in their homes would sell and upgrade, but they simply can’t afford to now that 30 year rates have jumped to 7.5%, said Ted Jenkin, a financial expert. It just doesn’t make financial sense. They say what goes up must come down, but younger generations need to understand they will not come back down to 3% again. The only reason they got that low was because of the pandemic and all of the money that we printed. And, if inflation doesn’t come down of this 3.7% number, we could easily see rates skyrocket even higher.

The Federal Reserve last month decided to hold interest rates steady after 18 months of aggressive hikes, citing progress in its battle against inflation.

The central bank maintained the target range for the federal funds rate at 5.25% to 5.5%. In a statement announcing the decision, the Fed said although inflation remains above its target of 2%, job gains have slowed.

Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation, the Fed said in a statement.