Some news that will shock almost nobody: Mortgage rates are now at their highest point since the turn of the century.
Yes, as if it wasn't hard enough to buy a house these days, we've got the highest mortgage rates since the year 2000.
Mortgage rates jumped Monday, following a rise in bond yields driven by investors' concerns that high interest rates and inflation will linger longer than expected.
The average rate on the popular 30-year fixed mortgage hit 7.48%, the highest level since November 2000, according to Mortgage News Daily. It has risen 29 basis points in just the past week.
7.48%!!!
And that number could go higher.
But let's hope not.
Higher mortgage rates exacerbate the supply situation. Current homeowners are reluctant to list their homes for sale because the vast majority of them have rates around or below 3%. To move to another home would mean more than doubling that rate. It has created what is now being called "golden handcuffs" among potential sellers.
Now, that doesn't seem all that bad until we plug in the numbers. Keep in mind, most of us are locked in at 3%, while this next example uses a much higher number.
For a buyer today, the difference in affordability from just a year ago is dramatic. The average on the 30-year fixed last year at this time was around 5.5%. For someone buying a $400,000 home, with 20% down on a 30-year fixed loan, the monthly payment today, with principal and interest, is roughly $420 more than it would have been a year ago.
Seriously, this is going to be a tough situation to recover from. Most people, I'd guess, will continue to wait out the market and pray that those rates are lowered.
As for the Fed, they are simply waiting for the economy to show at least some sign of recovery. It's at that point that they will consider lowering rates.
Let's hope that time is sooner rather than later.
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