The average 30-year mortgage rate has climbed to 6.02% — the first time the figure has surpassed 6% since 2008, according to new data from mortgage giant Freddie Mac.
The new rate level — double what it was this time last year — is an effect of the Federal Reserve's aggressive campaign to raise interest rates as it works to fight inflation.
The impact of higher rates will be to reduce housing demand and put downward pressure on home prices, Freddie Mac Chief Economist Sam Khater said in a statement.
Yet thanks to a nationwide housing shortage, property values will not fall very much, Khater said.
The median price for existing homes rose by 10.8% in July from the year before, to $403,800, the National Association of Realtors said last month.
“Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023,” said Lawrence Yun, the National Association of Realtors’ chief economist. “With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year.”
The higher rates have caused refinance activity to fall by more than 80% from last year, according to the Mortgage Bankers Association. More homebuyers are staying on the sidelines, it said in a statement Wednesday.
The housing group Redfin reported last week that new home listings fell by 18% year over year.
“The housing market always cools down this time of year, but this year, I expect fall and winter to be especially frigid as sales dry up more than usual,” Redfin Chief Economist Daryl Fairweather said in a statement.
“Thanks largely to mortgage rates near or even above 6%, potential homebuyers and sellers are focusing on the back-to-school season and enjoying the last days of summer rather than getting into an uncertain market."