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The average 30-year mortgage rate is sitting at 7% for the first time since January of last year, according to Freddie Mac. Now, economists are debating just how much higher rates can rise.
What’s with the surge?
The spike followed the Federal Reserve’s interest rate hike earlier this month, which was the central bank’s first increase in three years. Investors saw the hike coming and pushed Treasury bond yields higher, which dragged mortgage rates up with them (since they typically move together).
Experts see no reason that trend will stop:
Economists cited by Barron’s said, “there’s no reason to think that the rout [in bonds] couldn’t continue.”
In a severe scenario, that could push mortgage rates “to 8%, or even higher.”
How would that even happen? If the Iran war keeps driving up energy prices (which can keep inflation stubbornly high) while the US government continues borrowing heavily (which can push Treasury yields higher) mortgage rates could see an even bigger price boom.
It wasn’t always supposed to be this way: In February, mortgage rates fell below 6% for the first time since 2022, giving the housing market some early momentum. However, the Iran war quickly pushed rates back up, right as the crucial spring selling season crashed and burned.
/ Why should you care? If rates climb even higher, more Americans could be forced to buy cheaper homes, bring larger down payments, or postpone moving altogether at a time when affordability is already listed as the primary concern among prospective homeowners.
Our Interest Rates page shows updated figures for some of the most important rates and a quick calculator. Using current mortgage rates, the average price of a home in the U.S. would carry a monthly payment of about $3,190. Ouch.
