The 30-year, fixed-rate mortgage just reached its highest point in almost 23 years, coming in at 7.31% on Thursday. While the mortgage rate has fluctuated a bit during the last few months, it's still above 6%. This time last year, the rate fell to 6.7%. But above 7% could be the new norm. The average annual fixed-rate mortgage averaged 7.19% last week.
The last time mortgage rates were this high was back in 2000, when they hit more than 7.4%, according to historical Federal Reserve data. That was before Fannie Mae and Freddie Mac bought billions in subprime mortgages and the housing bubble.
Holding out for those 'better circumstances' might not happen anytime soon, though. Although the Fed didn't hike interest rates in September, Realtor.com Chief Economist Danielle Hale says the door is still very open to another increase by year's end, and projections show that the Fed expects rates to remain elevated over the next few years.
Soaring mortgage rates and astronomical monthly payments have made it challenging for many to buy a home. One-quarter of new buyers in July 2023 will pay at least $3,000 in average monthly principal and interest payment for a 30-year fixed-rate loan, according to data and analytics firm Black Knight.
The average July 2023 average monthly earnings of the average U.S. monthly earnings in July 2023 were just $4,600, according to economic data firm CEIC.
''It is generally considered a high burden, and one reason why affordability is at a 30 year low,'' Mark Fleming, chief economist of First American, said in a statement.
The 'lock-in' effect in which current homeowners are holding onto their properties because of the fear of rising rates on a new home is a significant impact on the long-term outlook of higher mortgage rates. It's also been one of the contributing factors for the drop in new listings-and why existing home sales would trail the year-ago total by almost 16% in 2023, Hale said.