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The last time mortgage rates were this high, ‘Tom Brady had yet to win a Super Bowl’
The long-term rate has hit its highest level in two decades. The cost of refinancing also went up.
The average long-term U.S. mortgage rate jumped this week to its highest level in 20 years, grim news for would-be buyers already facing high home prices and a low inventory of properties on the market.
According to Bankrate analyst Jeff Ostrowski, the last time rates were this high was in spring 2001, “when Amazon was still a plucky startup, Enron was a star of the energy sector, and Tom Brady had yet to win a Super Bowl.”
Mortgage buyer Freddie Mac said Thursday that the average rate on the benchmark 30-year home loan jumped to 7.09% from 6.96% last week. That’s the highest since April 2002, when the average rate clocked in at 7.13%. (Bankrate, which includes points in its calculations, shows a rate of 7.31% now, a peak of 7.35% in May 2001, and a spring 2022 high of 7.13% in April 2002. )
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“The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” said Sam Khater, Freddie Mac’s chief economist. “Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales.”
Mortgage applications were also down. “Mortgage application activity continued to decline last week as mortgage rates reached their highest levels since last October,” said Bob Broeksmit, CEO of the Mortgage Bankers Association. “These higher rates continue to keep many prospective buyers on the sidelines. On the bright side, we have seen a slight uptick in government purchase applications as well demand for [adjustable-rate mortgage] products, which could indicate that some buyers remain active in their homebuying search despite higher rates.”
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The average rate on a 30-year mortgage remains more than double what it was two years ago, when it was just 2.86%. Those ultra-low rates spurred a wave of home sales and refinancing. The sharply higher rates now are contributing to a dearth of available homes, as homeowners who locked in those lower borrowing costs two years ago are now reluctant to sell and jump into a higher rate on a new property.
The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, climbed to 6.46% from 6.34% last week. A year ago, it averaged 4.55%, Freddie Mac said.
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