By Aarthi Swaminathan
The numbers: Mortgage rates continue to march toward 7%, putting pressure on people looking to buy a home.
Mortgage rates are rising as the Federal Reserve pushes up key interest rates to fight the worst inflation the country has seen in 40 years.
Mortgage rates are up 41 basis points from the previous week — with one basis point equal to one hundredth of a percentage point, or 1% of 1% — and are now at highs last seen in mid-2007. To put the latest rate in perspective: A year ago, the 30-year rate was 3.01%.
The rise in rates is bad news for prospective buyers, adding potentially hundreds of dollars to their mortgage payments.
Bloomberg’s chief economist Michael McDonough said that last year, a buyer who put 20% down and had a $2,500 monthly mortgage payment would have gotten a $758,000 home.
This year? They’d get a lot less house — at $2,500 per month, they would only be able to afford a $476,000 home, he wrote on Twitter .
The median price of an existing home in the U.S. was $389,500 in August, down from $403,800 the previous month, the National Association of Realtors said .
The average rate on the 15-year mortgage also rose over the past week, to 5.96%. Adjustable-rate mortgages averaged 5.3%, up from the prior week.
“The uncertainty and volatility in financial markets is heavily impacting mortgage rates,” Sam Khater, chief economist at Freddie Mac, said in a statement.
Khater added that Freddie Mac’s survey of lenders revealed a large dispersion in rates and recommended that home buyers shop around with lenders to find a good quote.
Mortgage applications fell in the latest week as cautious buyers continued to pull back.
The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.89% rose slightly above 3.8% in morning trading on Thursday.
Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at firstname.lastname@example.org