Mortgage rates continued to climb for the third consecutive week, according to the Mortgage Bankers Association. The 30-year fixed rate is now the highest it’s been in more than 20 years, while homebuyers are increasingly turning to government-backed loans and adjustable-rate mortgages to cushion the blow.
Here are the current average mortgage rates, as of Aug. 16:
— 30-year fixed: 7.16% with 0.68 point (previous week: 7.09% with 0.7 point).
— 15-year fixed: 6.57% with 0.94 point (previous week: 6.51% with 0.92 point).
— 5/1 ARM: 6.2% with 1.45 points (previous week: 6.36% with 1.2 points).
— 30-year jumbo loans: 7.11% with 0.55 point (previous week: 7.04% with 0.66 point).
— 30-year FHA loans: 6.93% with 1.17 points (previous week: 7.02% with 1.14 points).
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Indicator of the Week: Historic Mortgage Rates
“Mortgage application activity continued to decline last week as mortgage rates reached their highest levels since last October. These higher rates continue to keep many prospective buyers on the sidelines. On the bright side, we have seen a slight uptick in government purchase applications as well (as) demand for ARM products, which could indicate that some buyers remain active in their homebuying search despite higher rates.”
— MBA President and CEO Bob Broeksmit, in an Aug. 16 statement
It’s evident that mortgage rates are higher now than they’ve been in a long time, but just how high are they from a historical perspective? Use the interactive chart below to see how today’s rates compare with those of the last 23 years.
Between January 2000 and today, the historical average mortgage rate is 5.14%, per an analysis of MBA data. Rates were north of 8% at the dawn of the new millennium, gradually declining to around 5% by summer 2003. Rates bounced between about 5% and 6.5% until the end of 2008, when the Great Recession caused the Federal Reserve to cut the benchmark rate to near-zero.
It took about two years for the full effects of the Fed’s rate cuts to take hold, with rates mostly dipping below the 5% threshold beginning in spring 2010. Rates generally stayed at or below 5% until the COVID-19 pandemic ushered in another era of near-zero rates set by the Fed.
The 30-year fixed mortgage rate reached record lows in January 2021; the Freddie Mac average rate fell to 2.65%, while the MBA rate bottomed out at 2.86%. During that time, millions of homeowners were able to take advantage by refinancing to a sub-3% mortgage rate, while buyers swarmed the market.
The timeless struggle of low supply and high demand sent home values surging throughout the pandemic, with annual home price appreciation hovering around 20% every month from summer 2021 through spring 2022, according to the Case-Shiller Home Price Index. That’s until the Fed began its most recent series of rate hikes, which resulted in the 30-year fixed mortgage rate rising from below 4% last March to over 7% by late October.
[Compare: Compare Mortgage Rates]
In the 10 months since then, rates have stayed elevated in the 6% to 7% range. Which brings us to today: MBA puts the average 30-year fixed rate at 7.16%, while Freddie Mac reports 7.09%. No matter which data you use, it’s true that mortgage rates are at their highest levels since 2001.
So, what comes 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 expectations of a recession. While economists still believe rates will pull back by the end of the year, they’ve revised their forecasts, with rates now expected to stay above 6% until 2024.
In the meantime, homeowners will remain reluctant to sell, unwilling to trade in a record-low mortgage rate for the historically high rates available today. Homebuyers will continue to contend with low housing inventory, high home prices and 7% mortgage rates. The housing market is in a stalemate — something that’s unlikely to change until rates pull back from their current levels.
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Mortgage Rates Are at the Highest Level in 22 Years originally appeared on usnews.com
