Topline
Mortgage rates just climbed to their highest level since 2002, according to data released Thursday, as homebuyers grapple with exorbitant interest payments amid the Federal Reserve’s most aggressive monetary policy in years.
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Key Facts
The average 30-year mixed mortgage rate was 7.09% during the seven-day period ending Thursday, according to weekly data released by mortgage provider Freddie Mac.
Interest payments are now more than twice as steep as they were at the beginning of last year, when 30-year mortgage rates hovered at 3% just before the Fed’s tightening cycle kicked off.
Potentially more troublesome for the broader economy is the difference between average mortgage rates and government-issued bonds: Moody’s Analytics economist Cris deRitis told MarketWatch the 277-basis-point spread between 10-year Treasury note yields and 30-year average mortgage rates is “highly unusual” and typically only observed “during periods of financial crisis such as the Great Recession or the early 1980s recession.”
Other than the high borrowing costs, perhaps more troublesome for the broader economy is the difference between average mortgage rates and government-issued bonds.
Key Background
After spending most of 2020 and 2021 between 2.5% and 3.5%, mortgage rates shot up dramatically last year as the Fed hiked the federal funds rate, making borrowing of all kinds more expensive. The 30-year mortgage rate has been above 6% since September after not crossing that threshold since 2008. Similar dramatic jumps in mortgage rates preceded most recessions over the last five decades, such as the roughly 200-basis-point jump in 30-year rates before the turn of the millennium and a more than 600-basis-point spike in the early 1980s during a recession accompanied by heavy inflation.
Further Reading
Source: https://www.forbes.com/sites/dereksaul/2023/08/17/mortgage-rates-just-hit-highest-level-in-21-years/