Breaking News:

HOUSING + HOMELESSNESS

Mortgage rates soar to their highest level in 21 years

Aug 17, 2023, 11:29 AM | Updated: 11:43 am

Mortgage rates soar to their highest level in 21 years...

US mortgage rates surged this week to their highest level in 21 years. Newly constructed homes in Queen Creek, Arizona, are pictured here on June 5. Rebecca Noble/Bloomberg/Getty Images

Washington, DC (CNN) — US mortgage rates surged this week, rising to their highest level in 21 years.

The 30-year fixed-rate mortgage averaged 7.09% in the week ending August 17, up from 6.96% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.13%.

Rates have been above 6.5% since the end of May and climbing higher since mid-July. The last time rates were over 7% was in November of last year when they hit 7.08%. This week’s average rate is the highest the 30-year, fixed-rate mortgage has been since April 2002 when it was 7.13%.

Mortgage rates have spiked during the Federal Reserve’s historic rate-hiking campaign sending home affordability to its lowest level in several decades. Buying a home is more expensive because of the added cost of financing the mortgage, and homeowners who previously locked in lower rates are reluctant to sell. The combination of low inventory and high costs has squeezed would-be homebuyers, sending home sales about 20% lower than a year ago.

“The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” said Sam Khater, Freddie Mac’s chief economist. “Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales.”

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.

Inflation concerns remain

The rising average rate for a 30-year, fixed rate loan is mirroring the trend of 10-year treasury yields, which recently hit their highest level since the summer of 2007.

Treasuries moved higher as investors reacted to the release of the Federal Reserve’s meeting minutes on Wednesday, which said members are worried that inflation will linger longer than expected at an elevated level, said George Ratiu, Chief Economist at Keeping Current Matters, a real estate market insights and content company.

“Coming out of a three-year pandemic, the economy continues to expand, boosted by solid consumer spending and business investment,” said Ratiu. “For most Americans, the economic growth means job security and better pay checks.”

The downside however, he said, to the strong wage gains is that the Fed remains hawkish on the outlook for taming inflation this year.

“With the view of the late 1970s’ twin inflation peaks firmly in its monetary lens, the central bank remains determined to bring price growth to the 2.0% target,” he said. “Measures of core inflation are still north of 4.0%, which means that additional rate hikes are on the Fed’s monetary agenda.”

While the Fed does not set the interest rates that borrowers pay on mortgages directly, its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasuries, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

“Despite still high prices and elevated interest rates, July’s retail sales data showed consumer spending continues to increase solidly as demand is being boosted by high wage growth,” said Jiayi Xu, an economist at Realtor.com.

While this strong economic data might cool worries about an imminent recession, it could give rise to concerns that interest rates might stay elevated for an extended period, she said.

Meanwhile, it is worth noting that the Fed is moving cautiously to ensure that the effects of earlier rate hikes are fully revealed.

“As a result, the Fed may opt to take another ‘wait-and-see’ strategy in its upcoming meeting, which may help potentially mitigate the recent upward trajectory of mortgage rates,” Xu said.

This is a developing story and will be updated.

The-CNN-Wire
™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

Housing + Homelessness

Image of new single family homes under construction in the South Jordan area of the Salt Lake Valle...

Simone Seikaly

Lawmaker looks toward Utah Inland Port, other development, to ease Utah housing crunch

Utah Senate Majority Leader Kirk Cullimore looks to the Utah Inland Port for answers to Utah's housing issues.

23 hours ago

Are you thinking of selling your home in the spring or summer? It's important to prepare it before ...

Michelle Lee

Selling your home? Here’s what you can do to prepare

Are you thinking of selling your home in the spring or summer? Here are some tips on how you can best prepare it for the market.

2 days ago

A sign welcoming people to the city of Ogden on 25th Street....

Verl Johansen

Ogden housing among 41 metro areas with inventory levels at or above pre-pandemic levels

Ogden housing availability makes the area one of 41 metro areas with supply at or above pre-pandemic levels.

3 days ago

Davis County learned over the weekend that the temporary Davis County warming center it was using i...

Bryanna Willis

Davis County warming center changes location due to early building demolition

A Davis County warming center has changed its location after the city got word that the building it was originally using is set for an early demolition.

10 days ago

A "For Rent" sign is attached to a fence at a home in West Valley City, Utah on Monday, July 10, 20...

Randall Jeppesen

Rent bill sputters out in Utah Legislature

The Utah Rental Housing Association opposed the bill, saying the sponsor hadn't taken their concerns into account.

12 days ago

ground is broken on a weber county development for starter homes...

Britt Johnson

Gov. Cox’s starter home goal may face roadblocks, builder says

One Utah builder said Gov. Spencer Cox's goal of building 35,000 new starter homes over the next few years is possible but not easy.

19 days ago

Sponsored Articles

Filing taxes online using a computer...

The Law Offices of Jordan F. Wilcox

Tax time is approaching. What to do if you have debilitating IRS debt

Is the IRS threatening you with wage garnishment, asset seizure or business closure? Here are some ideas to resolve your tax dilemma.

Full speed through the snow. A man on skis is pulled by his through the snow at full gallop Skijori...

Bear Lake Convention and Visitors Bureau

Get ready for an unforgettable skijoring adventure in Bear Lake!

“Skijoring the Bear” takes place this year on February 21-22 in Garden City, Utah.

the bedroom in a geodesic dome shows the night sky...

Clear Sky Resorts Bryce Canyon

Your front row to an extraordinary cosmos show

As America's first glass dome stargazing resort, Clear Sky Resorts Bryce Canyon is one of the world’s most unique and spectacular places to stay.

2 people huddled up in a blanket and warm clothes sipping hot chocolate...

Bear Lake Convention & Visitors Bureau

The best ways to spend your Christmas vacation in Bear Lake

If you're dreaming of a white Christmas this year, Bear Lake should definitely be on your radar. Read this guide for more!

big crowd of people under holiday lights in an outdoor market...

Western Nut

Our favorite family Christmas activities in Utah

We gathered up a list of our favorite activities, movies, and treats to try this holiday season that the whole family can enjoy.

an IT tech looks at a laptop in front of a server network...

Comcast Business

Tips to protect yourself from phishing attacks

Check out this resource from Comcast Business to learn more about phishing attacks and how to protect yourself from becoming a victim of one.

Mortgage rates soar to their highest level in 21 years