Mortgage Rates See Biggest Weekly Jump in More than 30 Years
June 15, 2022
Mortgage rates surged by more than half a percentage point this week amid rampant inflation and the largest interest rate increase from the Federal Reserve since 1994. The weekly increase in mortgage rates is the largest since 1987 and brings rates to the highest level since 2008.
The average rate for a 30-year fixed-rate mortgage rose to 5.78% this week, up from 5.23% the week before. Rates have nearly doubled in the last 12 months. They were at an average of 2.93% this week last year.
Potential homebuyers, already facing inflation and historic home price growth, are now finding homes even less affordable as the cost of borrowing increases.
Last year, a buyer purchasing a median-priced home for $390,000 with a 20% down payment with a 30-year fixed-rate at an interest rate of 2.93% would have a monthly mortgage payment of $1,304, according to Freddie Mac. The same home today, at the same price but with a mortgage that carries an interest rate of 5.78% would mean monthly payments of $1,827, an increase of more than $500 each month.
Higher mortgage rates are likely to erode demand in the housing market and further strain affordability for potential buyers, and homebuilder sentiment has continued to decline as demand wanes.
Sentiment among the nation’s homebuilders fell for the sixth consecutive month and is now at the lowest level since June 2020, when the economy was still largely shut down due to the pandemic.