Mortgage rates march towards 7%, reaching highest level since 2007

Mortgage rates are up as the Federal Reserve pushed key interest rates up to deal with the worst inflation the country has seen in 40 years. 

That’s up 41 basis points from the previous week — one basis point is equal to one hundredth of a percentage point, or 1% of 1%. 

The rise in rates is bad news for prospective buyers, as it potentially adds hundreds of dollars to their mortgage payments.

Mortgage rates are now at highs last seen since mid-2007. To put the latest rate in perspective: A year ago, the 30-year was at 3.01%.

Bloomberg’s chief economist Michael McDonough said a $2,500 monthly mortgage payment — with 20% down — would have gotten a buyer a $758,000 home last year.

This year? You’d get a lot less house — with $2,500 per month, you’d only be able to afford a $476,000 home, he wrote on Twitter
TWTR,
-1.35%.

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%. The adjustable-rate mortgage 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, so home buyers should shop around with lenders to find a good quote.

Mortgage applications also fell in the latest week, as cautious buyers continue to pull back as rates march towards 7%. 

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.798%
rose slightly above 3.8% in morning trading on Thursday.

Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at [email protected]