Mortgage rates have hit a two-decade high rising above 7 percent. The milestone comes as the U.S. housing market continues to tank with more buyers choosing to wait out the recession and sellers holding on to their current mortgage rates, that for most, are under 3.5%.
Prior to March of this year, home-borrowing rates were on the way down after a 40-year low, before the Federal Reserve started to increase interest rates to combat out-of-control inflation.
The last two decades of low interest-rate policies had encouraged growth in the mortgage market, which, except in the housing crisis in 2007–08, boosted the rate of U.S. homeownership.
The rate on a 30-year fixed mortgage hit 7.08 percent on Oct. 27, its highest level since April 2002, according to a survey by mortgage lender Freddie Mac.
Experts say it is feasible that interest rates will continue to rise, topping off near 10 percent over the next 18 months.
This is a massive jump from a year ago, when it stood at 3.14 percent.
The surge in monthly home loan rates, due to the additional interest that buyers are now paying at higher rates, have pushed the market into a downturn.
“As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month,” said Sam Khater, chief economist at Freddie Mac.
The latest news is a major blow to the housing market, which saw home sales fall by 11 percent last month because of rising mortgage rates, reported The Wall Street Journal.
“In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward,” said Khater.
Existing home sales have declined for eight straight months, as high borrowing costs force many Americans to put off buying, due to the rising price of food, gas, and other necessities.
Buyers putting 20 percent down for a median-priced home loan now have to make a monthly payment of $2,300, up from $1,300 a year ago, Realtor.com told The Wall Street Journal.