Mortgage Rates Retreat, Still Near Highest Level In 22 Years

Mortgage rates fell this week but remain at their highest level since 2001, according to Bankrate’s national survey.

The average rate on 30-year mortgages fell to 7.32 percent this week, down from 7.36 percent last week, according to Bankrate’s weekly national survey of large lenders.

The average rate on 30-year home loans last topped this level in May 2001, according to Bankrate research. That was before the Sept. 11 terror attacks led the Federal Reserve to slash interest rates, and well before the Great Recession spurred the Fed to keep rates low.

While mortgage rates briefly breached 7 percent in late 2022, they retreated this year as the smart money bet on an economic downturn. The sharp reversal in mortgage rates reflects a resilient U.S. economy, the Fed’s ongoing war on inflation and a recent downgrade of U.S. government debt and the dwindling chances of a recession.

“This move back up through the 7 percent level has been rapid and somewhat surprising, adding insult to injury for those already struggling with housing affordability,” says Mark Hamrick, Bankrate’s senior economic analyst. “We might not yet be at a peak for mortgage rates given recent economic momentum and lack of clarity on Federal Reserve policy.”

Indeed, some observers say mortgage rates could be headed to 8 percent. Lawrence Yun, chief economist at the National Association of Realtors, says the future path of rates depends on 10-year Treasury yields and on what the Fed does at its Sept. 20 meeting. Should You Refinance With The Same Lender?

We are at this critical juncture,” Yun said last week. “[Mortgage rates] can either break higher, up to 8 percent, or lower, to 6.5 percent.

After taking a breather from inflation-fighting in June, the Fed resumed rate increases when it met last month. The central bank announced a widely anticipated quarter-point increase in interest rates, its 11th boost since 2022.

While the Fed doesn’t directly set fixed mortgage rates, it does set the tone — and as the central bank has boosted its policy rate from zero in early 2022 to 5.25 percent now, mortgage rates have risen sharply.

This is the most aggressive raising of interest rates in 40 years,” said Yun.

While homeowners grew accustomed to super-low mortgage rates over the past two decades, they now face a new reality. Roof Insurance: ACV versus Replacement Cost

“The punchbowl of lower rates has been taken away,” says Hamrick. “That’s inflicted a kind of sobering environment on the housing market.”

Mortgage rates remain chained to inflation, a metric the Fed has been moving to control. The most relevant benchmark, however, is the 10-year Treasury yield, which were above 4.1 percent in recent days. Treasury yields ticked up after Fitch Ratings downgraded the U.S. government’s credit rating from AAA to AA+.

Mortgage rates don’t take direct cues from the Fed and will instead respond to the outlook for the economy and inflation. A slowing economy and an easing of inflation pressures are the prerequisites for lower mortgage rates.
— Greg McBride, Bankrate chief financial analyst

What happened to mortgage rates this week

The 30-year fixed mortgages in this week’s survey had an average total of 0.3 discount and origination points.

Over the past 52 weeks, the benchmark 30-year fixed-rate mortgage has averaged 6.73 percent. A year ago, the 30-year fixed-rate mortgage was 5.78 percent. Four weeks ago, the rate was 7.09 percent. The 30-year fixed-rate average for this week is 1.3 percentage points higher than the 52-week low of 6.02 percent. How to prepare your home for a natural disaster

As for other loans:

Facing an affordability squeeze, more borrowers are opting for ARMs, even though the savings is small.

How mortgage rates affect home affordability

The national median family income for 2023 is $96,300, according to the U.S. Department of Housing and Urban Development, and the median price of an existing home sold in July 2023 was $406,700, according to the National Association of Realtors. Based on a 20 percent down payment and a mortgage rate of 7.32 percent, the monthly payment of $2,235 amounts to 28 percent of the typical family’s monthly income.

A year ago, median family income was $90,000, the median home price was $399,200 and the average mortgage rate was 5.63 percent. Buying the typical home then required 25 percent of a family’s monthly income.

The sharp rise in mortgage rates has squeezed affordability and sparked a slowdown in home sales. First-time buyers are especially challenged by this market. However, home prices haven’t fallen significantly — and values are unlikely to decline, given the shortage of homes for sale, housing economists say.

“Buyers can expect to continue seeing mortgage rates above 6 percent, although with 11 months of rates in that range, many home shoppers have adjusted their budgets to the new reality,” says George Ratiu, chief economist at Keeping Current Matters, a real estate marketing company.

Many housing economists are hopeful that mortgage rates will fall later this year as inflation comes under control.

“If we see mortgage rates trend down, consistent with inflation returning to target levels, it should remove substantial friction from real estate markets,” says Ruben Gonzalez, chief economist at real estate brokerage Keller Williams.

Where mortgage rates are headed

Experts expected to see rates decrease by the end of 2023 as the Fed’s round of rate hikes draws to an end, but the resilience of the U.S. economy has thrown a wrinkle into those expectations. The job market remains strong, and the U.S. economy has yet to fall into recession.

“We do expect mortgage rates to trend down once the [Fed] clearly signals that they have reached the peak for this cycle, as the reduction in uncertainty with respect to the direction of rates should narrow the spread of mortgage rates relative to Treasury benchmarks,” says Mike Frattantoni, chief economist at the Mortgage Bankers Association.

Housing economists agree that the slowdown in inflation eventually will create downward pressure on mortgage rates. Repaying Your Mortgage After Forbearance

“Low inflation means low mortgage rates,” Yun says. “Therefore, decelerating consumer prices could steadily lift home sales and increase home production in a few months.”


The national survey of large lenders is conducted weekly. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We’ve conducted this survey in the same manner for more than 30 years, and because it’s consistently done the way it is, it gives an accurate national apples-to-apples comparison. Our rates differ from other national surveys, in particular Freddie Mac’s weekly published rates. Each week Freddie Mac surveys lenders on the rates and points based on first-lien prime conventional conforming home purchase mortgages with a loan-to-value of 80 percent. “Lenders surveyed each week are a mix of lender types — thrifts, credit unions, commercial banks and mortgage lending companies — is roughly proportional to the level of mortgage business that each type commands nationwide,” according to Freddie Mac.

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