Mortgage rates hit 7.5% for the first time since 2000 as house sales tumble to multi-decade low
- 30-year mortgage rates increased throughout September ending at 7.53 percent
- Rates will likely remain high as the Fed indicated interest rates will rise again
- Home sellers are slashing prices as sales were at their lowest levels since 1995
US mortgage rates surpassed 7.5 percent for the first time since November 2000.
The rate on a 30-year fixed home loan rose by 0.12 percent to 7.53 percent in the week ending September 29, according to data from the Mortgage Bankers Association.
In turn, home purchase applications dropped by 5.7 percent in the week to October 4 to the lowest level since 1995.
Interest rates have been on the rise since the Fed started raising its funds rate in a bid to curtail inflation and minimize consumer spending.
The property market has reached an effective stalemate – a combination of the high interest rates and high prices, caused in part by limited inventory, have deterred potential home movers.
US mortgage rates surpassed 7.5 percent for the first time since November 2000, according to data from the Mortgage Bankers Association
The limited inventory has arisen as many Americans are now locked into their current homes because their existing mortgage rates are low compared to market rates.
More than 90 percent of homeowners have a mortgage rate under 6 percent and many have rates closer to 2 or 3 percent, below the current rate of inflation.
But those who are looking to sell appear to be becoming increasingly desperate.
Data from property portal Zillow shows 9.2 percent of listings had their asking prices slashed in the week ending September 23 – compared to 6 percent in April and 7.9 percent in the same week in September 2019.
Zillow senior economist Jeff Tucker wrote in a report: ‘For determined buyers, with enough budget room to accommodate the recent jump in mortgage rates, this fall is looking more and more like a sweet spot.
More than 90 percent of homeowners have a mortgage rate under 6 percent and many have rates closer to 2 or 3 percent
Data from property portal Zillow shows 9.2 percent of listings had their asking prices slashed in the week ending September 23
‘There are more motivated sellers and more active listings overall than any time since last December, improving buyers’ chance to find the right fit.’
He added the cuts appeared to suggest ‘either buyers have pulled back, sellers have overreached with too-high list prices, or some combination of both.
Despite the recent Fed hikes, a strong labor market has maintained consumer spending and officials have suggested another rate hike is likely before the end of the year.
That suggests mortgage rates will likely continue to rise.
JP Morgan CEO Jamie Dimon has warned that Americans should brace for interest rates to reach 7 percent. Currently the benchmark lending rate is between 5.25 and 5.5 percent.