Bad news for homebuyers: Mortgage rates approach 7%, the highest level in 2023

Mortgage rates rose again, reaching a new high for the year.

The median rate on 30-year fixed-rate mortgages was 6.87% as of Tuesday afternoon, compared to 6.07% on 15-year mortgages, according to Mortgage News Daily.

Rates are officially at their highest level in a year. But to be clear, rates were higher — they passed the 7% threshold and hit 7.37% back in October, according to MND data.

The rate hike “has a significant impact on payments and availability, so you have to assume it means fewer buyers in the market,” Mike Simonsen, founder of Altos Research, said in a recent YouTube video.

Based on the average cost of an existing US home, which was $359,000 as of January, with a down payment of 20%, a typical mortgage would cost a potential home buyer about $2,300 per month, according to the MND Mortgage Calculator.

More than two weeks ago, rates fell below 6% to 5.99% on February 2. The buyer at this point would be paying about $170 less per month.

Mortgage rates have jumped in the past few days after the US government released its January inflation report. The inflation report showed that the economy is still in a hot state, prompting the market to expect the Fed to continue raising its benchmark interest rate.

Buyers may wait even longer to see if rates come down, but timing will be tricky. “There is enough pent-up demand competing for a relatively small number of homes, resulting in stable or even rising prices in many local markets,” Lisa Sturtevant, Bright MLS Chief Economist, wrote in a note last week.

And so “because of this pent-up demand, many people will agree that rates above 6% represent the ‘new normal’ in the housing market,” she added.

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