Mortgage rates could hit 8%, economists say

Mortgage rates could hit 8%, economists say

Economists have predicted mortgage rates could go above 8 percent if the economy continues to show signs of strength and the US decides to raise interest rates again.

Mortgage Rates have not hit such levels since 2000, according to data . 

Now experts tell MarketWatch that rates, currently averaging 7.26 percent for a 30-year fixed mortgage, could edge even higher. 

Even a slight bump in mortgage rates can cost homeowners thousands of dollars over the life of their home.

Mortgage rates determine how much interest has to be paid on a loan.  

The 30-year is ‘at a critical stage,’ Lawrence Yun, chief economist at the National Association of Realtors,. 

‘If the 30-year-fixed mortgage rate can hold at a high mark of 7.2 percent — and the 10-year yield holds at 4.2 percent — then this would be the high for mortgage rates before retreating,’ Yun said. 

Economists have predicted mortgage rates could go above 8 percent

The 30-year is ‘at a critical stage,’ Lawrence Yun, chief economist at the National Association of Realtors said 

‘If it breaks this line and easily goes above 7.2 percent, then the mortgage rate reaches 8%.’

Cris deRitis, deputy chief economist at Moody’s Analytics also told MarketWatch rates may rise.

‘Mortgage rates could rise significantly if global investors demand higher yields for fixed-income assets,’ deRitis explained.

‘Historically, the mortgage-rate spread has only been around this level only during periods of financial crisis such as the Great Recession or the early 1980s recession,’ deRitis added.

‘The historical average is closer to 175 basis points.’

If rates indeed climb so high for 30-year mortgages the effect would be keenly felt in the housing market Yun said.

‘At 8 percent, the housing market will re-freeze, All-in-one web analytics with fewer buyers and far fewer sellers,’ he said. 

However, he added ‘as long as the job market doesn’t turn negative, then home prices will be stable — though home sales will take another step downward.

If there is a job-cutting recession, then home prices will fall as some will be forced to sell while there are few buyers.’

Dailymail.com analyzed how the cost of an average home has shot up in two years 

Rates have not hit 8 percent since 2000, according to data compiled by Freddie Mac

The soaring cost of homeownership has left 82 percent of property shoppers ‘locked into’ their current homes because they fixed their deals when rates were low, officials from Freddie Mac . 

As a result, they are hesitant about moving as it would mean having to swap to a mortgage with a higher rate.

One in seven homeowners who are not planning to sell their home cited their current low rate as the main reason for staying put.

The number of new properties being listed in June was subsequently 20 percent lower than the same period last year.

Meanwhile, data from the Mortgage Bankers Association revealed the average loan size on a purchase application had fallen to $423,500 – its lowest level since January 2023.

Mortgage rates shot up last year in response to the Federal Reserve’s aggressive interest rate policy.

The Fed has raised its funds rate 10 times in the last 15 months in a bid to tame red-hot inflation.

Inflation in the US annual rate – rising slightly in July from June’s 3 percent annual increase.

Prices rose 0.2 percent month-on-month to July, driven mainly by shelter costs, which include rent.

This accounted for 90 percent of the monthly increase, according to the Bureau of Labor Statistics. 

But in June, the bank announced a pause on hikes to reflect the recent cooling of inflation – after it dipped to 4 percent.

However, rates offered by lenders on homes are not directly tied to the Fed’s funds rates and are instead dictated by the yield on 10-year Treasury bonds.