US 30-Year Mortgage Rate Climbs to Highest Level Since 2000 at 7.48%
The US 30-year mortgage rate soared to 7.48% on Monday, resulting in the least affordable homebuying market in the US in four decades. The Federal Reserve officials are set to meet at the annual symposium in Jackson Hole, Wyoming, this week, with many expecting the US policymakers to remain hawkish in their campaign against inflation.
Mortgage Rates Tripled Since 2021
Mortgage interest rates in the US continue their rapid ascend, hitting the highest level in more than 2 decades this week. Notably, the average interest rate on 30-year mortgages surged to 7.48% – the highest since November 2000.
With the latest increase, the 30-year mortgage rate nearly tripled in just a few years from the lows recorded during the coronavirus pandemic. In January 2021, the average 30-year rate was as low as 2.65%.
Mortgage rates are heavily impacted by changes in bond yields, which have been rising rapidly due to a combination of factors, one of them being the reduced demand for T-bonds due to the resilient US economy. In addition, the US government’s unceasing borrowing, which boosts the supply of Treasury bonds, also contributed to declining T-bonds prices.
Following a continual increase for 10 straight quarters beginning in the fall of 2020, the median US home sale price has decreased for two consecutive quarters to $416,100. This level is still $87,100 higher than the quarter just before the pandemic, representing an increase of 26.4%.
US residents who purchase the median-priced home with a 20% down payment and an average interest would have to pay an estimated monthly mortgage fee of roughly $2,300. According to the mortgage services firm Black Knight, this is the costliest homebuying market in the US in almost 40 years.
More Interest Rate Hikes Likely Despite Declining Inflation
Another factor that added to rising yields is tied to persisting inflation fears. As a result, the Fed recently signaled it plans to keep raising interest rates to bring down prices, diminishing the likelihood of imminent rate cuts.
The Fed’s decisiveness to continue hiking rates comes despite a noteworthy drop over the past year. The latest consumer price index (CPI) report showed that annual inflation fell to 3.2% in July 2023, down from its 9.1% peak last year.
Policymakers on the Federal Open Market Committee (FOMC) lifted interest rates by another quarter point last month to a new target range of 5.25% – 5.5% – the highest since January 2001. However, the CPI decline was not enough for the Fed to slam on the brakes, with other inflation drivers such as car repair services, bread and pet food, and rent prices still climbing at a record pace.
This article originally appeared on The Tokenist
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