For the seventh consecutive week, mortgage rates have increased, inching nearer to 8%. This is the longest streak of mortgage rate increases since the spring of 2022, says Sam Khater, Freddie Mac’s chief economist.
“Rates have risen two full percentage points in 2023 alone and, as we head into Halloween, the impacts may scare potential home buyers,” he says.
Pending home sales did tick upward in September, despite rising rates, but mortgage applications have mostly stalled this month in response to the latest increases. Total mortgage application volume is now at its slowest pace since 1995, the Mortgage Bankers Association reported this week.
“Affordability remains a significant hurdle for many, and the only way to address it is lower rates and greater [housing] inventory,” Khater says.
On a $400,000 home, using this week’s 30-year rate average of 7.79%, buyers could face a monthly mortgage payment of $2,301, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. A year ago, the same $400,000 home, bought with an interest rate of 7.08%, would have carried a monthly payment of $2,146—$155 per month lower, Lautz says.
“For some households, this could easily be the cost of gas or utilities for one month,” she says. “This mortgage interest rate is pricing out some first-time home buyers by reducing housing affordability, especially with the rise in home prices.”
However, there may be hope on the horizon. NAR Research’s mortgage rate forecast, released this week, predicts that the 30-year fixed-rate mortgage will peak in the fourth quarter of this year and then decline, reaching 6.9% by the second quarter of 2024.
“This decline in mortgage rates will be a welcome relief to home buyers, and potential sellers and consumers on the sidelines are very likely to rebound into the market at that time,” Lautz says.
Freddie Mac reports the following national averages on mortgage rates for the week ending Oct. 26:
- 30-year fixed-rate mortgages: averaged 7.79%, rising from last week’s 7.63% average. A year ago, 30-year rates averaged 7.08%.
- 15-year fixed-rate mortgages: averaged 7.03%, increasing from last week’s 6.92%. A year ago, 15-year rates averaged 6.36%.