The 6% mortgage is back.
For the first time since 2008, a widely viewed survey shows the average interest rate on 30-year fixed home loans is above 6%, the latest in a series of hikes that have slowed the housing market sharply. .
A year ago, the average rate on a 30-year term mortgage was 2.86%, but inflation and the Federal Reserve’s efforts to fight it have raised rates this year.
According to the survey released on Thursday hostage legend Freddie Mac, This week’s average stood at 6.02%, up from 5.89% last week.
The average rate on a 15-year fixed mortgage, popular with refinancers, rose to 5.21%, up from 5.16% last week and 2.12% a year ago.
Even before the latest increase, higher mortgage rates sharply slashed demand this year, driving home sales down and some experts predicting a year-on-year decline in home prices in 2023.
In July, Southern California home sales fell 35% from a year earlier, while average prices were up 8.8%, a much smaller increase than the nearly 17% seen in April.
If rates stay here, or keep rising, it could further reduce demand and make overall home values more likely to decline as potential homeowners think they can afford even less.
Compared to a year ago, a 6.02% increase adds $1,105 to monthly mortgage payments if you put 20% down on a $740,000 home, which was Southern California’s average price in July.
Buying a million dollar house? This would be $1,494 more per month.
However where the rates from here are not entirely clear. In large part this is because the interest borrowers pay reflects what investors are willing to pay for mortgages pledged in the secondary market.
Influencing factors including Federal Reserve policy and the trajectory of both inflation and the economy as a whole.
With the uncertainty surrounding those factors, rates have been volatile in recent months. After close to 6% in June, rates retreated. They fell less than 5% in the first week of August, then again before starting a climb of 6.02%.
Keith Gambinger, vice president of research firm HSH.com, said rates have risen in recent weeks in part because the labor market remains firm and investors see less of an immediate recession and more likely that inflation will remain high.
Freddie Mac’s survey included mortgages for those with excellent credit put 20% down, which means that many current home buyers should expect rates higher than the survey average.
The last time rates were so high was in November 2008, when 30-year mortgages averaged 6.04%.