Mortgage rates in the U.S. surged to 7.49% this week, up from 7.31% the week before, Freddie Mac reported on Thursday — making homeownership an even more distant dream for potential homebuyers. A year ago, the interest rate for a 30-year fixed mortgage stood at 6.66%.
Mortgage rates have spiked as a result of the Federal Reserve’s efforts to curb inflation, which has driven up the 10-year Treasury yield, Freddie Mac added, a crucial determinant of mortgage rates.
The increased cost of mortgage financing, coupled with soaring home prices and lack of inventory, has made homeownership out of reach for millions of Americans. Last month, The National Association of Realtors (NAR) found that home sales dropped 15.3% compared to the same period last year, while the median home sale price rose 3.9% from last year to $407,100 — the third month in a row where the median price surpassed $400,000.
“Home prices continue to march higher despite lower home sales,” NAR chief economist Lawrence Yun said in the report. “Supply needs to essentially double to moderate home price gains.”
The combination of limited supply and rising rates is resulting in a slowdown of sales but persistently high costs, Jiayi Xu, an economist at Realtor.com, told CNN.
“While declining pending home sales and new home sales signaled a slowdown in buyer activities, the increasing home listing prices and shorter days spent on market suggested that homebuyers are competing over the limited inventory,” Xu told the outlet.
The rise in rates has led to significant variations in mortgage rates among lenders, with some offering rates close to 7% and others exceeding 8%, The Wall Street Journal reported. When rate volatility is high, lenders frequently adjust the rates they offer, meaning borrowers who seek multiple quotes can possibly get a lower rate.
According to a Freddie Mac report earlier this year, prospective buyers who shop around for different quotes have the potential to save thousands. If borrowers get at least four quotes they can save between $600 and $1,200 annually, the report found, while getting at least five can lead to $6,000 in savings over the span of the loan.
