Mortgage rates remain at jarringly lofty levels. In late September, the average rate on a 30-year home loan surged past 7.5 percent for the first time since November 2000, according to Bankrate data.
For October, experts don’t expect rates to depart much from that high point.
Fed’s ‘higher for longer’ keeps pressure on mortgages
Mortgage rates broke through 7 percent faster than anticipated. The average rate on a 30-year home loan was 7.42 percent as of early September, according to Bankrate’s weekly national survey of lenders. That figure surged all the way to 7.55 percent in Bankrate’s final survey of the month.
For a 30-year loan at that rate, you’d pay $702 per month for every $100,000 borrowed. At the current median national price of $407,100, that equates to about $2,775 per month, assuming you’re making a 3 percent down payment.
Not long ago, experts thought rates might fall to 5 percent this year.
At its September meeting, the Federal Reserve declined to boost its policy rate again, but did signal it doesn’t expect to cut rates any time soon.
That new outlook led to a spike in 10-year Treasury yields, which are correlated with 30-year mortgage rates.
“Higher for longer seems to be the mentality of the Fed right now,” says Scott Haymore, head of Capital Markets and Mortgage Pricing at TD Bank. “They pushed out any decrease in rates until Q2 2024.”
For months, the major mortgage rate driver was inflation and the Fed’s response. While the policymaker doesn’t directly control mortgage rates, its moves set the overall tone for borrowing costs.
Outlook hazy for the rest of the year
Economists agree that the pandemic-era 3 percent rates aren’t coming back. The question now is how much higher they’ll go.
“The biggest risk to mortgage rates is a broad souring of sentiment for Treasurys — a low-probability but extremely high-impact event,” says Greg McBride, chief financial analyst for Bankrate. “Barring that, October will likely bring renewed concerns about a weakening economy and strained consumer, helping reel mortgage rates back in a bit, but not enough to get below the 7 percent threshold.”
Some are optimistic. The Mortgage Bankers Association (MBA) predicts rates will drop to 6.3 percent by the end of 2023.