Mortgage rates inched higher again this week, with the 30-year fixed rate jumping past the 7% threshold to 7.09%, according to the Mortgage Bankers Association. Both fixed and adjustable mortgage rates increased across the board as a result of continued economic strength.
Here are the current average mortgage rates, as of Aug. 9:
- 30-year fixed: 7.09% with 0.7 point (previous week: 6.93% with 0.68 point).
- 15-year fixed: 6.51% with 0.92 point (previous week: 6.39% with 0.78 point).
- 5/1 ARM: 6.36% with 1.2 points (previous week: 6.18% with 1.16 points).
- 30-year jumbo loans: 7.04% with 0.66 point (previous week: 6.89% with 0.58 point).
- 30-year FHA loans: 7.02% with 1.14 points (previous week: 6.85% with 1.05 points).
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Indicator of the Week: Exceeding Economic Expectations
“There is no doubt continued high rates will prolong affordability challenges longer than expected, particularly with home prices on the rise again. However, upward pressure on rates is the product of a resilient economy with low unemployment and strong wage growth, which historically has kept purchase demand solid.”
– Sam Khater, Freddie Mac’s chief economist, in an Aug. 10 statement
At the beginning of 2023, many economists expected the U.S. economy to slide into a recession before year-end as a result of the Federal Reserve’s aggressive monetary policy and sustained interest rate hikes carried over from 2022. Forecasters believed that an economic slowdown may cause the Fed to loosen its tight grip and potentially cut rates down the line, which would have relieved some of the upward pressure on mortgage rates.
But eight months into the year, it’s clear that previous forecasts didn’t pan out. The economy “has successfully confounded expectations of a recession,” propped up by unrelenting consumer spending and commercial investments, says George Ratiu, chief economist at Keeping Current Matters, a real estate insights company.
“The job market continues to expand even as the pace is moderating, and wages are outpacing price gains, a welcome reprieve for consumers who have seen their expenses skyrocket over the past two years,” Ratiu says. “Real estate markets are benefiting from more people gaining jobs and better paychecks this year.”
As a result of this economic resilience, mortgage rates have stayed higher for longer than previously expected, passing the 7% mark once again this week. On top of that, prospective sellers are reluctant to let go of their existing mortgage rates, keeping resale inventory low – and home prices elevated. While one might think that this affordability conundrum would push buyers beyond their means, demand still exceeds supply in today’s housing market.
“Considering that prices have been rising over the past six months and mortgage rates have been pegged above 6.5% since May of this year, the 4.2 million annual sales pace is a highlight of solid demand,” Ratiu says.
And yet, rates can’t keep rising forever. In our latest mortgage rate forecast, I explain why rates are expected to stay above 6% through the end of 2023 and what might happen when rates are expected to fall.
