Rising mortgage rates pushed into new territory this week, with the average 30-year fixed rate topping 6% for the first time in more than a decade.
The average was 6.02%, up from 5.78% last week, in the weekly survey by Bankrate, which like NextAdvisor is owned by Red Ventures. The last time the 30-year rate topped 6% in this survey was November 2008, during the early months of the Great Recession.
In a separate survey by the government-sponsored entity Freddie Mac, the average 30-year fixed rate rose to 5.89%.
Rates continue to move significantly from week-to-week and even day-to-day, driven by a variety of wider economic factors. Chief among them is inflation, which was 8.5% in July, and the response of the Federal Reserve to inflation.
“It’s not surprising that mortgage rates are climbing,” says Danielle Hale, chief economist for Realtor.com. “Inflation continues to be high. The Fed has reiterated its commitment to fighting inflation, which means higher short-term rates, which tends to bleed over into longer-term rates including for things like mortgages.”
The run-up in rates this year has been dramatic – Bankrate’s survey was around 3.3% at the start of 2022 – and that has cut into buyers’ purchasing power, significantly slowing down the housing market.
Don’t expect rates to return to 3.3% anytime soon, Hale says. “A 6% mortgage rate is probably something that today’s shoppers need to potentially get used to until we see inflation come back down,” she says.
In your inbox every ThursdayHow Homebuyers Can Manage 6% Mortgage Rates
An average mortgage rate of 6% is difficult for homebuyers. That’s why home prices are dropping – fewer people can afford this market. But that 6% average doesn’t mean you’ll necessarily get 6% from a lender. Your offer could be wildly different depending on your credit score, debt-to-income ratio, the lender, and the day you get an estimate. It’s important to shop around to different lenders, and to get quotes from multiple lenders on the same day, given the rapid changes in the market, Hale says.
“You may see higher or lower rates depending on your credit profile,” she says.
You should also factor mortgage rate fluctuations into your homebuying budget. Make sure you have some extra room in case rates go up significantly between when you start looking and when you lock in a rate, Hale says. Run the numbers with higher mortgage rates than those currently on the market.
“It’s easy for consumers to underestimate how impactful small changes in mortgage rates can be if you think about how much you’re going to pay in interest over the life of the loan,” she says.
Pro Tip
Get quotes from multiple lenders on the same day. With rates moving so quickly, quotes on different days might not be a fair comparison.
