Mortgage Rates Near 7% As Fed Aims To Cool 'Red Hot' U.S. Housing Market
MSNOct 12, 2022
US mortgage interest rates have, on average, increased to their highest level in 16 years, according to data by the Mortgage Bankers Association (MBA) released on Wednesday, with rates more than doubling since January 2022 as the Federal Reserve increases interest rates amid rising inflation.
30-year mortgage rates are now over 7%, up from around 3% 10 months ago, according to Mortgage News Daily.
Increasing rates is a painful but necessary measure to cool the housing market and ensure that prices align with rents and other market fundamentals. There was a significant imbalance between supply and demand, and housing prices were going up unsustainably fast, which is why the Fed has been right to step in until they're brought down to normal.
Contrary to the hopes of the Fed, high mortgage rates may become the new normal that home buyers and homeowners will have to adapt to and accept over time. It’s unlikely that a housing recession will destabilize the economy — as it did in 2008 — but people will have to pay more out of their income.