Mortgage rates just hit a 20-year high. Here’s how they’re set and what you can do in your home search.
Real estate signs are posted outside homes for sale, Tuesday, Feb. 21, 2023, in Valrico, Fla. The average mortgage rate recently hit a 21-year record of 7.09 percent, according to Freddie Mac, significantly increasing the cost of acquiring a home for all but the most cash-rich buyers. That’s more than double the rate of a few years ago.Why are mortgage rates so high?
To a large extent, it has worked: The annual rate of inflation stood at 3.2 percent in July, far lower than last summer’s peak of 9.1 percent. Let’s say a home is being bought for $250,000 with a 20 percent down payment. Holding all else equal, the difference in monthly payment from a 3 percent interest rate and a 7 percent rate comes out to more than $500 a month, according to a Washington Post mortgage calculator.Joe Gyourko, who studies the housing market at University of Pennsylvania’s Wharton School of Business, recalls when he and his wife bought a house in the early 1990s.
Experts say it’s hard to predict what path mortgage rates will take moving forward, but they will depend to a large extent on what happens with inflation and how the Fed responds. Experts caution that no one knows when rates will fall. Buyers could be stuck with an unfavorable mortgage for years, warns Wharton’s Gyourko.How can I keep my rate as low as possible?
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