Mortgage Rates Hit All Time High Since 2000

The Federal Reserve has been raising rates across the board, affecting all markets, from the stock market to the crypto exchange. One market that has been hit the hardest during these rises is the mortgage market. The mortgage giant Freddie Mac reported that 30-year fixed mortgage rates have hit a high of 7.49%, one of the highest rates we have seen since the early 2000s.

Even more interesting than the higher mortgage rates is the fact that the amount by which mortgage rates range above or below the average has also spread recently. Previously the spread would stay between 0.1%-0.3%, while now we are seeing ranges from 0.4%-0.5%. This means that two people with very similar financial profiles can end up paying two very non-similar monthly mortgages.

Looking at previous data we can see that with rising interest costs, there is usually a wider range of available rates. Some lenders try to keep their rates as high as possible to make the most money per load, while other lenders try to keep rates down and attract more business.

Another key factor in this large variation in mortgage rates could be the benchmark 10-year Treasury yield. This is what typically drives mortgage rates. After a brief dip this spring, the 10-year yield is at its highest in 16 years.

According to the Atlanta Fed, the median American household needed 44% of its income to cover annual payments on a median-priced home as of July. In other words, a little less than half of a household’s income was needed for the sole purpose of having a roof over their heads (and not a fancy roof!)

With average mortgage rates on a 30-year fixed loan at about 7.50% and such a wide range of rates being offered by lenders, buyers are in a very good position to negotiate rates with their lenders. Being able to put more money down will help with negotiating rates with lenders. Lower rates also result in lower monthly payments for the buyer, potentially saving hundreds to thousands of dollars a month.

If you’re looking for another option to lower interest rates, you may want to consider home builder financing. Many home builders are taking advantage of the relatively strong new-home market, and choosing to finance either the first few years or even the life of a loan to make some extra cash on top of the building sale. 

If this is not the option for you then just consider getting multiple quotes on rates from multiple lenders. This way all the rates can be compared and even used as leverage in negotiating lower rates. At the end of the day, the lender is in business to try and sell a mortgage to the buyer and will come to an agreement in the end.

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