Mortgage rates rise, approaching 7%

After pausing last week, mortgage rates have risen again, approaching even closer to 7%.

The 30-year fixed-rate mortgage averaged 6.92% in the week ending Oct. 13, down from 6.66% the previous week, according to Freddie Mac. This is the highest average rate since April 2002. A year ago, the 30-year fixed rate stood at 3.05%.

Mortgage rates have more than doubled over the past year as the Federal Reserve continued its unprecedented campaign of raising interest rates to rein in soaring inflation. The combination of central bank rate hikes, investor worries about a recession and mixed economic news has made mortgage rates volatile over the past few months.

“We continue to see a tale of two economies in the data,” said Sam Khater, chief economist at Freddie Mac. “Strong job and wage growth is keeping consumer balance sheets positive, while lingering inflation, recession fears and housing affordability are causing housing demand to fall precipitously.”

He said the next few months will undoubtedly be important for the economy and the housing market. Already, home sales are plummeting and prices are falling.

According to Freddie Mac, the average mortgage rate is based on a survey of conventional home purchase loans for borrowers who have a 20% stake and have excellent credit. But many buyers who put less money up front or have less than perfect credit will pay more.

The Fed’s efforts to rein in inflation are having a profound impact on the mortgage market. But inflation is still higher than expected, suggesting that the central bank will continue to aggressively raise interest rates.

The Fed does not directly set the interest rates that borrowers pay on mortgages, but its actions influence them. Mortgage rates tend to follow the yield of 10-year US Treasury bills. When investors see or anticipate rate hikes, they take action that drives up yields and mortgage rates.

“Investors and lenders are reacting to inflation still at a brisk pace, which poses significant challenges for the economy and consumers,” said George Ratiu, senior economist and head of economic research at

The higher rates caused more potential buyers to abandon the market, leading to lower home prices and lower sales. But there is still a shortage of homes available for sale relative to buyer demand, which has kept prices high.

“The consequences are evident in rising rents and high house prices,” said Lawrence Yun, chief economist for the National Association of Realtors. “Even with an anticipated decline in home prices in some markets – primarily California – homes will remain unaffordable, while rents squeeze non-homeowners.”

Yun said that even with an impending economic recession, the Federal Reserve is unlikely to relax its aggressive monetary policy of raising interest rates.

“The 10-year Treasury yield topped 4% this morning, and mortgage rates will struggle to hold at an average rate of 7% in the coming weeks,” Yun said.

With fewer people looking for a mortgage to buy or refinance a home and an uncertain economic situation, credit is becoming increasingly difficult to obtain, said Bob Broeksmit, president and CEO of Mortgage Bankers Association.

“We’ve seen credit tighten as lenders and borrowers grapple with continued economic uncertainty and affordability issues,” he said. “Despite strong wage and employment growth in September, potential buyers remain reluctant to enter the housing market.”

Higher mortgage rates are making it even more difficult for potential buyers to afford a home.

“With incomes lagging behind inflation, homebuyers’ ability to finance a purchase has been reduced by mortgage rates that have risen from 3.1% at the start of 2022 to nearly 7%,” he said. Ratiu said.

For a family earning the median household income of $71,000 and using a 20% down payment, a typical home-buying budget was $448,700 in January of this year, according to This week, the same family could only afford a $339,200 house.

And the monthly payments have increased considerably.

A year ago, a buyer who staked 20% on a $390,000 home and financed the rest with a 30-year fixed-rate mortgage at an average interest rate of 3.05% had a monthly mortgage payment $1,324, as calculated by Freddie Mac.

Today, a homeowner buying a home at the same price with an average rate of 6.92% would pay $2,059 per month in principal and interest. That’s $735 more every month.

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