US Long-Term Mortgage Rates Reach 20-Year High Amid Limited Supply and Rising Home Prices
The average long-term mortgage rate in the United States has surged to its highest point in two decades, spelling bad news for prospective homebuyers who are already grappling with elevated home prices due to a scarcity of available properties.
According to Freddie Mac, a major mortgage buyer, the average rate for the 30-year home loan benchmark has risen to 7.09% from the previous week’s 6.96%. This marks the highest rate observed since April 2002, when the average rate was recorded at 7.13%. The rate also previously hit 7.08% in late October and early November. In contrast, the average rate stood at 5.13% just a year ago.
Freddie Mac’s Chief Economist, Sam Khater, attributes the climbing mortgage rates to the economy’s stronger-than-expected performance and the corresponding increase in the 10-year Treasury yield, which has subsequently pushed mortgage rates upwards. While issues of affordability have curtailed demand, the fundamental challenge of a scarcity of housing inventory continues to be the main factor responsible for sluggish home sales.
In comparison to two years ago when the average 30-year mortgage rate was a mere 2.86%, the current rate is more than double. This period of historically low rates had led to a surge in both home sales and refinancing activities.
However, the current significant rise in rates is exacerbating the shortage of available homes. Homeowners who locked in lower borrowing costs two years ago are now hesitant to put their homes on the market and enter the sphere of higher mortgage rates associated with new property purchases.
For 15-year fixed-rate mortgages, a popular choice among those refinancing their homes, the average rate has increased from 6.34% to 6.46% over the course of a week. This is in stark contrast to the 4.55% rate recorded a year ago, according to Freddie Mac’s data.