Mortgage rates climb to 16-year highs Borrowing costs for home loans hit their highest level in 16 years, with rates on a traditional 30-year mortgage hit 6.7% on Wednesday, according to Freddie Mac. Mortgage rates have more than doubled since early 2022. Mortgage rates are now just over 7% as measured by their “effective” interest rate, which takes into account the compounding period of a loan and thus provides a more accurate picture of the cost to homebuyers, according to Oxford Economics. A one percentage point increase in mortgage rates can add hundreds of dollars to a property’s monthly payments, depending on the size of the loan. These significantly higher costs are cooling the housing market. According to the Mortgage Bankers Association, mortgage loan applications fell about 14% in the last week of September. Borrowing $300,000 at a 6% interest rate on a typical mortgage would add up to $1,800 a month, including principal and interest, according to NerdWallet. Earlier this year, when interest rates were around 3.5%, the same loan would have amounted to a monthly payment of $1,350. Home hunters in the US have been hit with a double whammy this year by skyrocketing mortgage rates and still high home prices. The rising cost of home ownership is turning off many aspiring buyers who have opted to continue renting instead. Some relief for buyers may be on the horizon as home prices start falling and are likely to fall further in certain property markets, economists predict. real estate prices in Sacramento, California; Salt Lake City, UT; and Seattle, Washington are experiencing some of the sharpest declines. Economists expect mortgage rates to remain high as the Federal Reserve continues to hike interest rates to cool inflation, including two more hikes by year-end.

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