Mortgage rates rise to highest level since 2002, driving down housing demand
Homebuyers can still save money by comparing rates
Mortgage rates increased last week with the 30-year mortgage reaching "its highest level since April of 2002," Freddie Mac said. (iStock)
Interest rates for the average 30-year mortgage resumed their upward trajectory after a slight drop the previous week, reaching their highest level since 2002, according to Freddie Mac.
The average rate for a 30-year fixed-rate mortgage increased to 6.92% for the week ending Oct. 13, according to Freddie Mac's Primary Mortgage Market Survey. This is an increase from the previous week when it averaged 6.66% and remains significantly higher than the previous year when it was 3.05%.
Other loan terms also increased this week. The 15-year mortgage was 6.09%, up from 5.9% last week. Last year at this time, the rate was 2.3%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) increased to 5.81%, up from 5.36% and up from 2.55% last year.
"Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April of 2002," Freddie Mac Chief Economist Sam Khater said. "We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers' balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously."
If you're buying a home or looking to refinance your current mortgage, you can visit Credible and compare multiple mortgage lenders to find the right option for you.
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High rates limit homebuyers' ‘ability to finance’ home
Homebuyers lost a significant amount of purchasing power because of the rapid pace of mortgage rate increases this year, according to Relator.com Chief Economist George Ratiu.
To put it in perspective, Ratiu said that a family earning the median household income of $71,000 and using a 20% down payment today can only afford a $339,200 home; the same income would have stretched to $448,700 in January 2022.
"With incomes lagging behind inflation, homebuyers' ability to finance a purchase has been slashed by mortgage rates which surged from 3.1% at the start of 2022 to almost 7%," Ratiu said in a statement.
If you think you're ready to shop around for a mortgage loan, you can use the Credible marketplace to help you easily compare interest rates from multiple mortgage lenders and get prequalified in minutes.
TODAY'S MORTGAGE RATES HOLD STEADY ACROSS ALL TERMS | OCT. 13, 2022
Falling demand not slowing home price gains
High mortgage rates combined with already high home prices scared away potential homebuyers and homeowners, but home prices are still not reflecting this dynamic, according to Redfin.
The real estate brokerage said that requests for home tours and other home-buying services dropped in September to their lowest level since mid-June, when mortgage rates first jumped to 6%. And pending home sales were down 25% year over year, the largest decline since May 2020.
For now, home prices in most metro areas remain steady, with the median home sale price registering at $367,652, up 7% year over year, according to Redfin.
"Mortgage rates well over 6% are spooking homebuyers," Redfin Deputy Chief Economist Taylor Marr said in a statement. "Sellers are pulling back in this market, but buyers are pulling back even more."
Marr said it would take "a few months before home prices of closed sales start to reflect this shock."
If you want to take advantage of rising home values, you could consider taking out a cash-out refinance to help you pay down debt or fund home improvement projects. Visit Credible to find your personalized interest rate without affecting your credit score.
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