Mortgage rates hit highest level in 16 years!!

Prospective homebuyers face a new chill after the average interest rate on the most popular home loan rose to its highest level since 2006, data from the Mortgage Bankers Association showed on Wednesday.

The average contract rate on a 30-year fixed-rate mortgage rose by 6 basis points to 6.81% for the week that ended Oct. 7, marking a 16-year high for the cost of a home loan. 

The rise means that mortgage rates have now more than doubled since the beginning of the year, thanks to aggressive interest rate hikes from the Fed’s fight against inflation. 

Those actions, designed to cool the economy sufficiently to curb price pressures, have weighed heavily on the interest-rate-sensitive housing sector as expectations for Fed tightening have led to a surge in Treasury yields. The yield on the 10-year note acts as a benchmark for mortgage rates.

“With the likelihood of a weakening economy, which would lead to an increase in delinquencies,

there was a smaller appetite for lower credit score and high (loan to value) loan programs, along with a reduction in government streamline refinance programs,” said Joel Kan, an MBA economist.

The historically high rates have hampered new applications for mortgages. 

The MBA’s measure for mortgage loan application volume, dubbed the Market Composite Index, shows the number of people applying for loans fell 2% last week, and is now down 69% from this time last year. 

Additionally, the Purchase Index, the MBA’s measure of all mortgage loan applications for the purchase of a single-family home, showed a similar pattern. 

The index dropped 2.1% last week from the week prior, and is 39% lower than this time last year. 

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The MBA’s Refinance Index fell 1.8% last week and is down 86% from one year ago.

Home sales and homebuilding are the latest dominoes to fall due to the high rates, with home resales declining for seven straight months. However, home prices remain high even as house price growth slows, eroding affordability for buyers who are still competing due to a shortage of properties for sale. 

With Post wires