As mortgage rates reach their highest level in 23 years, more Americans are putting off home buying.
The 30-year mortgage rate averaged 7.49% as of Thursday, according to Freddie Mac, up from last week, when it averaged 7.31%. A year ago at this time, the 30-year rate averaged 6.66%.
The 15-year rate averaged 6.78%, up from last week, when it averaged 6.72%. A year ago at this time, the 15-year rate averaged 5.9%.
“Several factors, including shifts in inflation, the job market and uncertainty around the Federal Reserve’s next move, are contributing to the highest mortgage rates in a generation. Unsurprisingly, this is pulling back homebuyer demand,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Mortgage application volume has declined over the past 12 plus months, said Carolyn Morganbesser, associate vice president of mortgage origination at Affinity Federal Credit Union. Rising rates continue to deter homeowners from listing their homes, and inventory shortages affect potential buyers as prices continue to rise, she said. Fewer homes on the market keep prices high. Coupled with rising interest rates, affordability becomes a serious issue for would-be buyers.
“If you are a homeowner and your current interest rate on your home is in the 3% to 4% range, you would not list your home to purchase a new one with a rate in the 7% to 8% range.” Morganbesser said.
Homeownership is part of the American dream. But it is increasingly out of reach for many Americans, according to a report by Bankrate.
Bankrate’s Financial Security Survey finds that 74% of people surveyed consider owning a home a part of their goal. But three-quarters of those surveyed said affordability blocks them from buying.
SEE MORE: Which cities are seeing the biggest growth in home prices?
As rates have been rising for more than a year, mortgage applications have dropped month over month, Morganbesser said.
Interest rates are currently ranging — depending on credit scores — between 7% and 8% or higher, Morganbesser said. These rising rates affect borrower qualifying power as monthly principal and interest payments are skyrocketing.
“Even if the potential borrower can qualify for the higher principal and interest payment, when you add in real estate taxes, private mortgage insurance and homeowners insurance, in many instances, the total payment is more than they can afford,” Morganbesser said.
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