For Buyers, Mortgage Rates Hit Unwelcome Milestone

Average long-term US mortgage rates topped 7% for the first time in more than two decades this week, a direct result of the Federal Reserve's aggressive rate hikes intended to tame inflation not seen in some 40 years, per the AP. Mortgage buyer Freddie Mac reported on Thursday that the average on the key 30-year rate jumped to 7.08% from 6.94% last week. The last time the average rate was above 7% was April 2002, a time when the US was still reeling from the Sept. 11 terrorist attacks, but six years away from the 2008 housing market collapse that triggered the Great Recession. Last year at this time, rates on a 30-year mortgage averaged 3.14%.

Another sign of the effect of rising rates on the housing market: Sales of new homes fell nearly 11% in September from August, and nearly 18% from the previous year, the Wall Street Journal reports. Double-digit monthly declines are becoming more common, this being the fourth one in 2022. The Fed has raised rates five times this year, including three consecutive 0.75 percentage point increases that have brought its key short-term borrowing rate to a range of 3% to 3.25%, the highest level since 2008. At their last meeting in late September, Fed officials projected that by early next year they would raise their key rate to roughly 4.5%.

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