Mortgage Interest Rates Top 6% For The First Time Since 2008

For the first time since the housing crisis in 2008, mortgage interest rates have soared to over 6% making the new rate more than double what it was just one year ago.

As inflation rises, the Federal Reserve generally raises interest rates as well with the hope that demand, and therefore prices will drop which will in turn lower inflation.

Just since May the Fed has hiked up the interest rate four different times for a total of 2.25 percentage points. At its lowest point, in January 2021, the mortgage rate dropped to 2.65%. On September 16, the mortgage rate had more than doubled to 6.1%.

In “real” numbers, NewsMax reports that, “The typical mortgage payment is around $2,352 right now, which is 66% higher than the $1,416 of a year ago.” The huge increase in housing prices mentioned above comes from a combination of rising interest rates and near record-high inflation.

So far, the interest rate increases have done nothing to stem inflation which stood at 8.3% for the month of August. Inflation affects home buying in a lot of ways, but the main way is that inflation actually pushes the cost of houses up as well.

The Mortgage Bankers Association (MBA), according to Reuters, said, “its Market Composite Index, a measure of mortgage loan application volume, declined 1.2% from a week earlier and is now down 64.0% from one year ago. Its Refinance Index fell 4.2% from the prior week and was down 83.3% compared to one year ago.”

To top it off, a key reading on how inflation is trending was “worse than expected” which means that, most likely, the Fed will increase the mortgage rate again by 75 basis points.

New homes sales have fallen and rentals are expected to increase, but for a piece of good news, there is so little supply on the housing market, very few economists are expecting a housing crisis like was seen in 2008.