Originally Published: 28 SEP 23 12:00 ET
Updated: 28 SEP 23 12:58 ET
By Anna Bahney, CNN
Washington, DC (CNN) — US mortgage rates surged to their highest level in nearly 23 years this week as inflation pressures persisted.
The 30-year fixed-rate mortgage averaged 7.31% in the week ending September 28, up from 7.19% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 6.70%.
“The 30-year fixed-rate mortgage has hit the highest level since the year 2000,” said Sam Khater, Freddie Mac’s chief economist, in a statement. “However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances.”
The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.
Mortgage rates have spiked during the Federal Reserve’s historic inflation-curbing campaign — and while a good deal of progress has been made since June 2022, when inflation hit 9.1%, Fed officials say there is still a ways to go.
The Fed’s preferred inflation measure, the core Personal Consumption Expenditures index, is currently 4.2%, which is more than double the Fed’s target of 2%. Economists expect it to drop to 3.9% when the latest reading is released on Friday.
Higher for longer
This week’s mortgage rate surge followed last week’s small move higher, as investors settled in for “higher-for-longer” interest rates after last week’s Fed policy meeting, said Danielle Hale, chief economist at Realtor.com.
Hale said the takeaway from the meeting was that the upward adjustments from the Fed haven’t ended.
“Revised economic projections show that another rate hike this year is definitely on the table, and the expected policy rate in 2024 and 2025 was also higher than previously forecast,” she said. “Market participants are still playing catchup.”
While the Fed does not set the interest rates that borrowers pay on mortgages directly, its actions influence them.
Mortgage rates tend to track the yield on 10-year US Treasuries, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.
The yield on 10-year Treasuries rose from 4.3% on September 20 to 4.6% as of September 27.
This story is developing and will be updated.
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