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US mortgage rate hits highest level in 21 years

Popular 30-year fixed-rate mortgage reached 7.09% last week

By AFP - Aug 19,2023 - Last updated at Aug 19,2023

A house for sale is seen in Arlington, Virginia, on July 13 (AFP photo)

WASHINGTON — Mortgage rates in the United States have surged to the highest since 2002, said a home loan finance company Thursday, adding pressure to buyers who are already grappling with high costs and low inventory.

The popular 30-year fixed-rate mortgage reached 7.09 per cent this week, said Freddie Mac in a statement, adding that it last rose above the 7 per cent threshold in November 2022.

The housing market has been reeling since interest rates rapidly climbed in recent months, a trend that has made home owners reluctant to put their properties up for sale — having previously locked in lower rates on their mortgages.

The current rate will "make it even more difficult for potential homebuyers to afford the new home that they're looking for," said Economist Oren Klachkin of Oxford Economics.

"It's just becoming increasingly unaffordable. Rates are high, there're also signs that the flow of credit is being tightened as well and because of this, there's basically no supply out there," he told AFP.

A year ago, the 30-year rate stood at 5.13 per cent while rates hovered below 3 per cent in late 2020.

The latest 7.09 per cent figure is the highest since April 2002, according to Freddie Mac data.

"The more rates rise, the less likely you are to list your house because it just means that you have to move from your sub-four per cent mortgage into a new mortgage," Klachkin said.

This could potentially double the cost of home owners' monthly payments, if rates go to 8 per cent, he added.

In June, sales of existing homes fell to the slowest rate since January while the median sales price hit the second-highest on record, according to National Association of Realtors (NAR) data.

The NAR noted that a third of homes were sold above list price that month.

With a lack of existing homes for sale, buyers have been pushed into the market for new properties.

 

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