HomeBusinessMortgage rates reach highest level since 2008

Mortgage rates reach highest level since 2008

The 30-year fixed-rate mortgage averaged 5.89% in the week ending Sept. 8, up from 5.66% the week before, according to Freddie Mac. That’s significantly higher than last year around this time when it was 2.88%.

After a start of the year at 3.22%, mortgage rates rose sharply in the first half of the year to 5.81% in mid-June. But since then, concerns about the economy and the Federal Reserve’s mission to fight inflation have made them more volatile.

Mortgage rates rose again as markets continue to master the prospect of a more aggressive monetary policy to curb high inflation,” said Sam Khater, chief economist at Freddie Mac.

Interest rates had fallen in July and early August as fears of a recession emerged. But comments by Federal Reserve Chairman Jerome Powell at the central bank’s annual meeting in Jackson Hole in August turned investors’ attention back to the Fed’s fight against inflation, which drove interest rates higher.

This week, investors looked forward to the release of the Fed’s Beige Book, which provides a regional boost to the US economy and indicators of what might happen to interest rates at the Fed meeting in late September. Wednesday’s release pointed to continued price increases in all 12 Fed districts, although nine of those districts showed moderating increases, Jones said.

“This could be an early sign of the eventual decline in inflation, which would precede delayed rate hikes,” said Hannah Jones, economic data analyst for Realtor.com.

The Federal Reserve does not directly determine the interest rates that borrowers pay on mortgages, but its actions affect them. Mortgage rates usually follow US Treasury bonds with a 10-year maturity. Because investors see or anticipate interest rate hikes, they often sell government bonds, driving interest rates higher and, with it, mortgage rates.

Market slows due to affordability challenges

As mortgage rates have risen and house prices remain close to record highs, many home buyers have suspended their search.

A year ago, a buyer who put down 20% on a home with an average price of $390,000 and financed the rest with a 30-year fixed-rate mortgage at an average interest rate of 2.88% had calculated a monthly mortgage payment of $ 1,295. by Freddie Mac.

Today, a homeowner buying the same-priced home at an average rate of 5.89% would pay $1,849 per month in principal and interest. That’s $554 more per month.

Mortgage applications fell last week as the 30-year fixed rate bounced back to June highs, said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association.

Rates aren’t likely to fall again anytime soon, Fratantoni said, but the strong labor market should keep people wanting to buy homes.

“There is no sign of a pick-up in purchase requests yet, but the robust labor market and an increase in the housing stock should lead to an eventual increase in purchase activity.”

While mortgage rates are rising, the range of rates has also increased, according to Freddie Mac. That means borrowers can take advantage of shopping around for a better rate.

According to Freddie Mac’s research, borrowers can save an average of $1,500 over the life of a loan by getting one additional rate quote, and about $3,000 on average if they get five quotes.

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