WASHINGTON–Mortgage rates continue to hit new highs. Last week, the average rate on the 30-year fixed-rate mortgage was at its highest point since 2001, hitting7.23% in the week ending August 24, up from 7.09% the week before, according to data from Freddie Mac.
One year ago, the 30-year fixed-rate average was 5.55%.
Freddie Mac’s chief economist, Sam Khater, told the New York Times the indications are the ongoing economic strength in the U.S. will likely keep mortgage rates where they are or send them higher in the short term.
Challenges for Everyone
The high rates combined with a shortage of inventory have met strong demand, creating challenges for buyers and sellers.
The 10-year Treasury yield has been hovering above 4.0% since the start of the month, which has helped drive mortgage rates over 7%, the analysis further noted.
“Higher mortgage rates are expected to stick around as the bond market grapples with signs of a growing economy and what implications it could have on future monetary policy moves by the Federal Reserve, George Ratiu, chief economist at Keeping Current Matters, a real estate market insights and content company, told the Times.
The Concern
“Financial markets are concerned that the central bank will continue raising the funds rate, pushing borrowing costs higher,” Ratiu was quoted as saying. “For many investors there is worry that the Fed may overtighten on the monetary front and lead to economic damage.
“For buyers and sellers, today’s mortgage rates are presenting a significant affordability challenge,” Raitu continued. “For most people buying a home means borrowing money. At today’s rate, the monthly cost to purchase a home totals about $2,400, not including property taxes and insurance, a 17% increase from a year ago.”
Effects on Market
Meanwhile, not surprisingly, applications for a mortgage dipped to the lowest levels in 28 years last week, according to the Mortgage Bankers Association.