Mortgage rates climb to 6%, reaching a 14-year high

For the second time this year, mortgage rates have surpassed the 6 percent mark and hit their highest point since November 2008. Similar interest rates were last seen in June when a sudden increase in borrowing costs pushed homebuyers away from the market. 

The average rate for a 30-year fixed loan rose to 6.1 percent, causing a further decline in already weakened mortgage demand. Mortgage applications dropped 0.8 percent from one week earlier and 83 percent from last year, according to the MBA’s weekly survey. In just one year, interest rates jumped from below 3 percent to more than 6 percent. 

“Mortgage rates moved higher over the course of last week as markets continued to re-assess the prospects for the economy and the path of monetary policy, with expectations for short-term rates to move and stay higher for longer,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. 

The Federal Reserve has been increasing its benchmark interest rates in an effort to address rising inflation and cool the housing market. These rate hikes resulted in high borrowing costs for homebuyers. The good news is that mortgage rates are still below inflation, which climbed to 8.5 percent. 

“Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand. There is no sign of a rebound in purchase applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity,” Fratantoni said. 

Although the mortgage rates average 6 percent now, they might not remain at this level for long. The recent forecast from Fannie Mae says that the rate on a 30-year fixed loan will fall to 4.7 percent in 2022 and 4.5 percent in 2023. 

Resources:

“Mortgage Applications Decrease in Latest MBA Weekly Survey,” by Adam DeSanctis (Mortgage Bankers Association, 2022)

“Mortgage demand drops further as interest rates shoot back to June high,” by Diana Olick (CNBC, 2022)

“Mortgage rates will fall to 4.5% in 2023? That’s the estimate from Fannie Mae. Here’s what that means for homebuyers,” by Greg Iacurci (CNBC, 2022)

“Latest mortgage news: Rates surge past 6%, a 14-year high,” by Jeff Ostrowski (Bankrate, 2022)