U.S. mortgage rates reached 7.23% on Thursday, up 2 percentage points from this time last year, making it the highest level since 2001.
Mortgage rates have spiked during the Federal Reserve's historic inflation-curbing campaign, making the dream of owning a home more unaffordable than ever.
Rates dipped during the pandemic. In January 2021, they got as low as 2.65%, but in the years since, it has nearly tripled. A year ago, the 30-year fixed rate was 5.55%. It has been above 6.5% since May and has been climbing higher since mid-July — a sign that the housing market is still red hot.
That climb occurred as the Federal Reserve aggressively hiked interest rates to control inflation.
Compared to last year's statistics, where inflation stood at 9%, the current rate has descended to 3.2%.
So as inflation falls, mortgage rates continue to climb.
To put this in perspective, in the first quarter of the year, the median U.S. home sale price was $429,000. If you decided to buy a home at that cost and made a 10% down payment, with interest rates at 7.23% over a 30-year period, Zillow's mortgage calculator estimates that you would end up paying over $940,000 in total for your home.
To make matters worse, the pool of available pre-owned homes has shrunk, given that homeowners who once secured more favorable rates are now hesitant to put their properties on the market.
This combination of reduced housing inventory and heightened expenses has significantly contributed to a substantial decline in overall home sales.
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