This week saw the Federal Reserve’s aggressive rate hikes, meant to curb inflation not seen in more than 40 years, push the average long-term mortgage rate in the United States above 7% for the first time in more than two decades.
According to a report released by mortgage buyer Freddie Mac on Thursday, the benchmark 30-year rate increased from 6.94% to 7.08% on average.
In April 2002, when the United States was still recovering from the 9/11 terrorist attacks but six years away from the housing market collapse in 2008 that set off the Great Recession, the average rate last exceeded 7%.
Rates on a 30-year mortgage at this time last year averaged 3.14%.
The Federal Reserve increased its primary benchmark lending rate five times this year, including three straight rises of 0.75 percentage points that took it to a range of 3% to 3.25%, the highest level since 2008.
Fed officials predicted they would increase their crucial rate to around 4.5% by the start of the following year at their most recent meeting in late September.
Mortgage rates typically follow the yield on the 10-year Treasury note rather than necessarily reflecting Fed rate rises.
This is affected by several variables, such as investor expectations for future inflation and demand for American goods abroad.
As mortgage rates have more than quadrupled this year, many prospective homebuyers have turned away.
Since borrowing rates have risen to an unaffordable level for many Americans who are already spending more for food, petrol, and other necessities, existing house sales have decreased for eight consecutive months.
Because they don’t want to lock in a higher rate on their next mortgage, several homeowners have delayed listing their properties for sale.
The Fed is anticipated to increase its benchmark rate by another three-quarter percent at its meeting the following week.
Despite the rate rises, inflation has remained stubbornly above 8% at the consumer and wholesale levels, reaching 40-year highs.
There are some indications that the Fed rate rises are slowing the economy.
The labor market, which is still strong with the unemployment rate matching a 50-year low of 3.5% and layoffs continuing to be historically low, has appeared to be unaffected by the rate rises thus far.