Surging mortgage rates reached another high this week, eclipsing 7 percent for the first time in 20 years amid the U.S. Federal Reserve’s ongoing battle with inflation.
The 30-year-fixed rate mortgage climbed to 7.08 percent, up from 6.94 percent a week earlier, according to Freddie Mac. At the same time a year ago, 30-year fixed rate mortgages averaged 3.14 percent based on Freddie Mac data.
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“The 30-year fixed-rate mortgage broke seven percent for the first time since April 2002, leading to greater stagnation in the housing market,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
“As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month. In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward,” Khater added.
The rates for a 15-year fixed mortgage have also increased in the past year, reaching 6.36 percent this week.
The housing market has cooled significantly in recent weeks as the Federal Reserve’s fight with persistent inflation led to a series of large baseline interest rate hikes over the summer.
Another rate increase is expected again during the Fed’s next meeting in early November.
Trickle-down effects of these rate increases have significantly affected the housing market, leading to a sharp rise in monthly payments that have pushed more buyers out of the market.
Yet the mortgage rate increases have not affected Americans equally, according to Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors.
“Although mortgage rates reached all-time lows in 2021, not everybody was able to benefit from these low rates. During 2019 and 2021, the White homeownership rate rose by nearly 3 percentage points, while the homeownership rate for Black Americans rose by 2 percentage points,” Evangelou said in a statement.
“With 7% mortgage rates, only 15% of Black households can currently afford to buy the typical home compared to 30% of White households. Thus, Black families may fall further behind in homeownership compared to their White counterparts,” Evangelou said.