Highest Mortgage Rates Since 2018

As we try to fight off inflation, interest rates of all sorts are ticking up to fight the demand for products from cheap money. Real estate is no exception to this rate surge shock that 2022 has brought us. U.S. mortgage rates are continuing higher this week, rising to their highest levels since 2018, well before the pandemic and the slowdown we saw in 2019. The 30-year mortgage rate was up week over week, and topping levels not seen since 2018. Here is why we are seeing the highest mortgage rates since 2018.

Mortgage Rates Rise

According to Freddie Mac on Thursday, the 30-year mortgage rates were as high as 4.67%. This is an increase of a quarter percentage point from the week before number of 4.42%. Remember, while these rates may seem high in the short-term, these are still well below the historic average before the pandemic. Rates look to continue to increase to stave off demand from qualified buyers, which are still out there in this market. With real estate prices hitting historical levels, higher mortgage rates look to control the price acceleration, but not lead to a home price decline.

In 2022 alone, mortgage rates are up by over one and a half percent. We saw sub-3 mortgage rates for close to the whole year in 2021, but 2022 has created a new landscape. In some instances, the uptick in mortgage rates led to a small demand decrease. However, most markets have not seen much of a decline, as showing data from ShowingTime suggests a strong buyer demand to remain. While showings are slowing, it is more than likely because of the seasonality and the fact that there is a historical low amount of supply in the market. Remember, supply dictates demand, and until more people list their homes, we will see a slower market.

Fastest Increase In Decades

Rates have increased very quickly, and made some history for themselves, similar to home prices and demand. In fact, the increase we have seen in mortgage rates is the fastest increase we have seen since 1987. Throughout the 1970s and 1980s, there was a lot of mortgage rate volatility due to the Federal Reserve and their task of staving off inflation. With borrowing costs increasing drastically in as little as 3 months, we have seen the budgets of potential homeowners be stretched to the most on record. Potential homebuyers are hurting, not only with soaring home prices, but also with the second-whammy of higher mortgage rates.

Because of the hawkishness we have seen from the Federal Reserve this year, volatility in the rates, commodities, and inflation describe the market. These are the main drivers for mortgage rates, and they do not look to go lower any time soon. In fact, rates are only looking to go higher as the interest rates are going to increase from the Fed again. The rapid increase in the mortgage rates could continue for weeks or months because of the ongoing price pressures and inflationary pressures.

Buying With Highest Mortgage Rates Since 2018

While we all saw a rise in mortgage rates as an inevitability over the years, no one saw it increasing this much. In fact, we could be approaching 5% mortgage rates over the next few weeks and no one would expect it differently. After hitting a record low for the 30-year mortgage rate at 2.65% in January 2021, we are now talking about reaching the highest levels in a decade. The last time mortgage rates were at 5% was in February 2011, and we could very well be ending there sooner rather than later.

Borrowers with a $300,000 mortgage would pay $1,551 at the current 30-year average. That’s up $268 from the start of the year when rates were at 3.11%.