The average long-term US mortgage rate rises for 7th straight week, 30-year loan reaches 7.79%

The average rate on the benchmark 30-year home loan rose for the seventh straight week, creating an increasingly high bar to home ownership for Americans.

The rate on the 30-year fixed mortgage is at 7.79%, up from 7.63% last week, Freddie Mac said Thursday. A year ago the rate was 7.08%.

As mortgage rates rise, they can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already out of reach for many Americans. They also discourage homeowners who locked in far low rates two years ago, when they were around 3%, from selling.

Kevin Dayton, vice president of mortgage lending at CrossCountry Mortgage in Melville, said he advises borrowers to examine what their monthly payments would be if mortgage rates moved up by a quarter-point or a half-point while they search for a home.

“I tell clients. ‘Let’s shoot high when we’re talking interest rates … to make sure you can afford it, just in case we end up in that situation,’” he said.

The national median mortgage payment was $2,155 in September, up 11%, or $214, from a year ago, according to the Mortgage Bankers Association.

Sales of previously occupied U.S. homes in September fell for the fourth month in a row, grinding to their slowest pace in more than a decade.

“Purchase activity has slowed to a virtual standstill, affordability remains a significant hurdle for many and the only way to address it is lower rates and greater inventory,” said Freddie Mac chief economist Sam Khater.

The high rates are limiting applications for new mortgages. Wednesday the MBA reported that applications for new loans dipped to the slowest weekly pace since 1995.

The soaring cost of borrowing money for a home has skewed the U.S. housing market.

Millions of people who locked in mortgages at this time two years ago at 3% or below cannot afford to, or refuse to move, due to the comparative cost of financing a home today.

New home sales in last month jumped to 759,000, about 79,000 more than had been expected with prospective buyer flooding the only market where homes are available - those that were just built.

“Homebuilders are offering buyers interest rate buydown incentives that funnel demand into the newly built segment,” said Bill Adams, chief economist at Comerica. “They are also shrinking floorplans to boost affordability.”

Adams says home builders are the “surprise winner” of attempts by the Federal Reserve to cool inflation through interest rate hikes.

Mortgage rates have been climbing along with the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates can influence home loan rates.

The threat of higher rates enduring pushed Treasury yields this week to their highest levels in more than a decade. The 10-year Treasury yield hit 5% earlier this week and was at 4.89% in midday trading Thursday. It was at roughly 3.50% in May and just 0.50% early in the pandemic.

With Jonathan LaMantia