US mortgage rates scaled their highest level in 14 years, edging closer to 6% this week, as the market priced in continued aggressive Federal Reserve interest rate hikes.
The 30-year fixed mortgage rate averaged 5.89% during the week ending September 8, a jump from 5.66% in the week before. That is a major increase from the same time last year, when it was 2.88%.
At the start of 2022, mortgage rates were 3.22%, rising sharply in the first six months of the year, hitting 5.81% in mid-June. However, concerns about the economy and the Federal Reserve's declared mission to combat inflation have since made the rates more volatile.
The US Fed does not set the interest rates that borrowers pay on mortgages. However, its actions influence them. Mortgage rates are closely aligned with 10-year US treasury bonds. Whenever investors prepare for rate hikes, they divest from government bonds, which pushes yields and mortgage rates higher.
What does this mean for me?
Applications for mortgages dropped last week, as the 30-year fixed rate moved back toward its June highs. Consumers are rightly concerned about the surging price of many goods and are focusing on short-term purchases and essentials for now.
As mortgage rates have increased and home prices hover around record highs, many home buyers have looked to delay their investment in new houses, a result that is the primary objective of economic cooling.