Mortgage rates increased last week, with the 30-year loan reaching "its highest level since April of 2002," Freddie Mac said. (iStock)
The 30-year mortgage rate reached a new high last week, "leading to greater stagnation in the housing market," Freddie Mac said.
The average rate for a 30-year fixed-rate mortgage increased to 7.08% for the week ending Oct. 27, according to Freddie Mac's Primary Mortgage Market Survey — the first time it reached this threshold since April 2002. This was an increase from 6.94% the previous week and was still significantly higher than last year when it was 3.14%.
Other loan terms also increased last week. The 15-year mortgage was 6.36%, up from 6.23% the week before and 2.37% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) also increased to 5.96%, up from 5.71% the week before and up from 2.56% last year.
"As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month," Sam Khater, Freddie Mac's chief economist, said. "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."
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.
HOME PRICE GROWTH SLIPS IN AUGUST FOR FOURTH CONSECUTIVE MONTH: CORELOGIC
Another Fed rate hike is likely amid high inflation
The Federal Reserve is expected to raise rates again at its next meeting in November as inflation remains high, having risen 8.2% annually in September, according to the Bureau of Labor Statistics (BLS).
The Fed has already raised interest rates five times this year and the last three have been 75-basis point increases.
"Four 75 basis point hikes in a row marks the largest series of target federal funds rate hikes in more than three decades," Hannah Jones, economic data analyst at Realtor.com, said in a statement. "The FOMC is set to discuss future hikes at next week's meeting as the committee aims to bring down stubborn inflation without leading to widespread unemployment or economic strife."
If you want to take advantage of the current mortgage rates before another rate hike from the Fed, you can use the Credible marketplace to help you easily compare interest rates from multiple mortgage lenders and get prequalified in minutes.
TODAY'S 20-YEAR MORTGAGE RATES DIP BELOW 7% FOR FIRST TIME IN 16 DAYS | OCT. 27, 2022
Buyers searching for 'relief valve,' analyst says
Homebuyers are faced with the double challenge of high borrowing costs and home prices. Although home prices are cooling some — the latest S&P CoreLogic Case-Shiller Indices report showed that prices increased by 13% annually in August. This is down from 15.6% the month before.
For perspective, buyers with a 20% down payment are paying $1,000 more in their monthly mortgage payments than they would have one year ago, Jones said.
With these higher costs, she said homebuyers have turned to lower-priced markets to find deals they can afford. But "as long as mortgage rates and prices remain high, buyers will be looking for a relief valve," Jones said.
"Some may find renting to be the better option in the short term, while others may consider other home types such as condos," she continued. "Buyers who remain in the market may see lower prices and have some leverage relative to the last few months, though they will have to be cognizant of how higher mortgage rates impact housing costs."
If you want to take advantage of rising home values, you could consider 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.
FHFA TO CHANGE CREDIT SCORE MODEL FOR NEW MORTGAGES
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.