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Mortgage interest rates exceed 7%, their highest in two decades

The Federal Reserve's rate hike has boosted the mortgage rate for home purchases.

Hipoteca

(Flickr)

Published by
Alejandro Baños

Interest rates on 30-year mortgages continue to rise. This Thursday the rate spiked to 7.08%, up 0.14% from last week and the highest since 2002. The rate has more than doubled since one year ago. In practice, this means that for a loan of $10,000, the borrower must pay $708 in interest after the first year the loan isn't paid off.

The Federal Reserve continues to raise interest rates, which will surpass 4% before the end of 2022. The Fed is implementing these hikes to combat high inflation, but it impacts economic aspects like mortgages. High interest rates also hurt consumers, according to Freddie Mac chief economist Sam Khater:

As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month. In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward.

Mortgage payment by states

According to a report by the Mortgage Bankers Association, the national median monthly mortgage payment has risen 40.4% ($558) since the beginning of the year. It increased 5.5% from August to September alone. The median mortgage payment was $1,941 in September.

This past month, the states with the highest increases in mortgage payments were Nevada, Idaho and Arizona. By contrast, Connecticut West Virginia and Washington, D.C. saw the country's smallest margins of increase.

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