Thirty-year mortgages have jumped to 6.7%, the highest rate since 2007, just before the financial crisis of 2008, according to data from Freddie Mac released Thursday.
This is a more than double, a 116% jump, in 30-year mortgage rates from the 3.1% they were just a year ago. The increase will put likely put a dent in prospective homebuyers’ plans.
For instance, last year, a buyer of a $500,000 home who put down $20,000 on the home and financed the rest would pay the bank $208,000 in interest over 30 years, the Wall Street Journal estimates. Today, that buyer would pay about $529,000 in interest.
While 30-year mortgages are typically tied to 10-year Treasury rates as opposed to the fed funds rate, the bond market has been volatile in recent weeks, and so have 30-year mortgage rates. Thus, homebuyers would be wise to shop around for the best deal, Freddie Mac Chief Economist Sam Khater tells WSJ.
Rising mortgage rates are convincing some would-be homebuyers to rent instead, even though inflation is pushing those rates up, too. Inventory for homes for sale is also declining, as homeowners are reluctant to sell, knowing that mortgage rates for any new home where they might relocate, are rising in tandem.
In addition to the residential real estate market being restrained, applications to refinance a home are down 85% from a year ago, according to the Mortgage Bankers Association.
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