Mortgage rates rose for the fifth consecutive week, reaching yet again the highest level since the financial crisis.
The average rate on a 30-year fixed mortgage climbed to 6.29%, according to a survey of lenders released Thursday by
It was the second week in a row that rates topped 6%. The last time rates were this high was October 2008, when the U.S. was deep in recession.
The sharp rise is another product of the Federal Reserve’s campaign to curb decades-high inflation. On Wednesday, the central bank raised interest rates for the fifth time this year. Officials indicated that more large increases are on the way even if such moves risk a recession.
A year ago, mortgage rates were 2.88%.
Higher rates affect virtually every corner of the economy, but their effect on housing is particularly acute since higher rates can easily add hundreds of dollars to a buyer’s monthly mortgage payments.
Take a borrower who buys a $500,000 house with a 20% down payment. With a 2.88% mortgage, that person can expect to pay about $200,000 in interest over 30 years for their $400,000 loan, according to a mortgage calculator by Bankrate.com. With a 6.29% mortgage, the borrower could pay more than $490,000 in interest.
Higher rates have cooled housing significantly. Though home prices continue to notch year-over-year gains, prices are falling month-over-month. Many would-be buyers are getting priced out of homeownership. Many homeowners feel stuck in place, since selling would mean taking on a mortgage with a significantly higher rate.
The national median mortgage payment was $1,839 in August, up 33% from the start of the year, the Mortgage Bankers Association said Thursday.
Mortgage rates don’t move automatically when the Fed raises its rate. They typically rise or fall in tandem with the benchmark 10-year Treasury yield, but that yield is heavily influenced by expectations for Fed rates. The 10-year yield this week hit its highest level since 2011.
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Appeared in the September 23, 2022, print edition as ‘Fed Action Pushes 30-Year to 6.29%.’