Average monthly mortgage payment at near all-time high

With mortgage rates hovering around 5% to 7% in recent months, mortgage payments have jumped to a near-record high, according to the latest data by Redfin.

In fact, the typical monthly mortgage payment was $2,612 with a 7.18% mortgage rate during the four weeks ending Sep. 3 – just $18 below the all-time high set in May. 

And housing demand has plunged to near-record lows. Mortgage-purchase applications went down 28% year-over-year, marking a 28-year low, according to data from the Mortgage Bankers Association (MBA). The rate dropped 2% from a month prior. 

But high home prices are also pulling potential homebuyers away from the housing market. The median home price is $378,725, according to Refin’s report. That price tag represented a 4.5% year-over-year increase and the sharpest spike since October 2022. 

These rising home prices could be attributed to the lack of available homes, as many homeowners remain hesitant to pull away from the record-low mortgage rates they found during the onset of the COVID-19 pandemic. There are also more buyers than sellers throughout most of the country, Redfin reported. 

If you’re concerned about high mortgage rates, you could consider refinancing your home loan to a lower interest rate which could help you lower your monthly payments. Visit Credible to compare options from different lenders without affecting your credit score. 

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Fed weighs interest rate hikes ahead of September meeting 

Since 2022, the Federal Reserve has raised interest rates 11 times in an attempt to cool inflation – a move that has had a significant impact on mortgage rate movements. 

The central bank’s Federal Open Market Committee (FOMC) is set to make interest rate decisions at its next meeting scheduled for Sep. 19 to Sep. 20.

However, inflation climbed above 3% year-over-year in July. That’s above the Fed’s preferred 2% target range. Additionally, the latest jobs report came in strong despite signs of cooling. The economy grew with 187,000 jobs in August, slightly beating experts’ predictions. Still, the unemployment rate increased to 3.8% in August, up from the 3.5% recorded last month.

"The report also suggested that wage growth — a key concern for Fed policymakers — is moderating," Jim Baird, Plante Moran Financial Advisors' chief investment officer, said in a statement. "Average hourly earnings rose by 0.2% for the month, a pace that should be much more palatable to the Fed as they work to get the inflation genie back in the bottle."

Some experts also believe that recent employment data could convince the Fed to put a break on interest rate hikes at its next meeting. 

"This report should be enough for the Fed to keep the federal funds target rate on hold at its next meeting," MBA Senior Vice President and Chief Economist Mike Fratantoni said in a statement. "We expect that they will hold here until next spring, and their next move should be cut. The combination of a still strong job market, and rates that should trend down over time, is positive for the housing market."

Nonetheless, uncertainty remains.

"Labor conditions continue to cool as the tangible effects of the Fed's inflation playbook filter into the real economy," Baird said. "For now, the slowdown hasn't reached stall speed, and the economy remains on a growth trajectory. Whether or not that can be sustained will depend on the degree to which prior rate hikes weigh further on growth and the extent to which policymakers deem additional tightening is needed to ensure a return to the Fed's inflation target."

If you’re worried about rising mortgage rates, you could refinance your home loan to a lower rate to help you cut your monthly payments. Visit Credible to get your personalized rate in minutes.

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Homeowners face rising housing costs and debt

Current mortgage debt remains a burden for many homeowners. Mortgage balances increased by $627 billion annually in the second quarter of 2023, according to the most recent data from the Federal Reserve Bank of New York. That brought mortgage balances to $12.01 trillion. Additionally, many Americans continue struggling with other forms of debt. Total household debt reached $17.06 trillion in the second quarter, increasing by $909 billion annually. In particular, credit card debt surpassed $1 trillion in the second quarter, indicating a $45 billion quarterly increase.

"Credit cards are the most prevalent form of household debt and continue to become even more widespread," the NY Fed said in a blog post. "Consider that there are 70 million more credit card accounts open now than there were in 2019, before the pandemic."

In addition, 5.08% of credit card balances flowed into serious delinquency or at least 90 days past due in the second quarter, according to the NY Fed. That signaled an annual increase from 3.35%.

"Compared to other debt categories this quarter, credit card balances saw the most pronounced worsening in performance, following a period of extraordinarily low delinquency rates during the pandemic," The NY Fed said.

But there are several ways to pay off debt quickly. Personal loans, for example, can help consumers pay down high-interest debt with a lump sum at a preferably lower interest rate. The average interest rate on a personal loan is 11.48%, compared to the 20.68% average credit card interest rate, according to the latest data by the Federal Reserve Bank of St. Louis.

If you're struggling with high-interest debt, you could consider paying it down with a personal loan at a lower interest rate, which could help lower your monthly payments. Visit Credible to speak with an expert and get your questions answered. 

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