Mortgage Rates Top 7%, Delivering a Fresh Affordability Shock

Overview

• A daily Mortgage News Daily index showed the average 30-year fixed rate at 7.20% on Sept. 18, with Freddie Mac and Zillow reporting similarly elevated readings around the high 6s to low 7s.
• The Fed raised its benchmark rate by a quarter point this week, a move that coincided with higher long-term borrowing costs and helped lift mortgage pricing.
• Rising 10-year Treasury yields, which reached near 5%, have led lenders to raise mortgage rates because long-term bond yields typically set the baseline for mortgage pricing.
• The jump to roughly 7% raises monthly payments by hundreds of dollars on typical loan sizes, for example adding about $400 per month on a $500,000 30-year loan versus a 6% rate.
• Higher rates are deepening the mortgage 'lock-in' effect that keeps owners from selling, tightening supply and contributing to weak home sales, and further rate moves will be key to watch for housing demand and affordability.