Home loan rates exceed 6 percent, highest since late 2008
Loop North News

The Home Front
If you planned to buy a home this year and were waiting for mortgage rates to move lower, slap your forehead and admit it. You totally missed out on winning the mortgage game in 2022.

21-Sep-22 – For the first time since late 2008, fixed home loan rates have surpassed 6 percent. On September 15, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed home loan rates rose to an average of 6.02 percent nationwide, up from 5.89 percent a week earlier. A year ago, 30-year fixed loans averaged only 2.86 percent.

Freddie Mac

Interest charges on home loans have doubled over the past nine months because the Federal Reserve shifted from a relaxed monetary policy that has supported the economic rebound from the 2020 pandemic recession toward a tighter policy.

Jeremy Rose

“Young home buyers are in shock because interest rates are moving upward so fast,” said Jeremy Rose (left), mortgage broker for Guaranteed Rate in Chicago. “Buyers ask if they should wait for rates to come down. The reality is rates likely will inch higher for the rest of the year and into 2023.”

A borrower who places a 20 percent down payment and takes out a 30-year fixed rate loan of $300,000 at 6 percent interest this week would make a monthly principal and interest payment of $1,799, Rose said.

“The payment would have been only $1,265 – nearly 30 percent less – in early January of 2022, when benchmark 30-year fixed mortgage rates were around 3 percent,” he said.

Home loan rates have steadily increased since December 15, 2021, when the Fed launched its new policy. With several increases this year the federal funds target rate has risen from 1.66 percent in January to the current range of 2.25 to 2.5 percent in 2022. Another 100-basis point increase is expected at the Fed’s next meeting on September 21.

This new hike likely will push the 10-year Treasury rate, the gauge economists use to forecast 30-year-fixed mortgage interest charges, to a range of 3.25 to 3.5 percent.

Photo provided by Don DeBat

Like most banks, the Fed is not your friend. The Fed wants to cut inflation and really doesn’t care if your mortgage payment shoots up 30 percent.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit.

Sam Khater

“Mortgage rates continued to rise alongside hotter-than-expected inflation numbers,” said Sam Khater (left), Freddie Mac’s chief economist. “Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate.”

Freddie Mac also reported that 15-year fixed mortgages averaged 5.21 percent on September 15, up from 5.16 percent a week earlier. A year ago, the 15-year fixed loans averaged 2.12 percent.

Thirty-year fixed mortgage interest rates ended 2020 at a rock-bottom 2.65 percent, the lowest level in the Freddie Mac survey history, which began in 1971. Home loan rates set new record lows an amazing 16 times in 2020, and tens of thousands of homeowners refinanced.

• Contact Don DeBat at debatnet@aol.com

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