Mortgage rates could soon hit 8 PERCENT – mark not seen since 2000 – as feds consider further interest rate hikes

Economists have predicted that mortgage rates could rise above 8 percent if the economy continues to show signs of strength and the US Federal Reserve decides to raise rates again.

According to data, mortgage rates have not been this high since 2000 curated by Freddie Mac.

Now experts tell MarketWatch that rates, currently averaging 7.26 percent for a 30-year fixed mortgage, could go even higher.

Even a slight increase in mortgage rates can cost homeowners thousands of dollars over the life of their home. The mortgage interest rate determines how much interest must be paid on a loan.

The 30-year-old is “in a critical phase,” said Lawrence Yun, chief economist at the National Association of Realtors, told the publication.

“If the 30-year fixed mortgage rate can stay at a high level of 7.2 percent — and the 10-year rate at 4.2 percent — then this would be the highest mortgage rate before it retreats,” Yun said.

The 30-year period is “at a critical stage,” said Lawrence Yun, chief economist at the National Association of Realtors.

‘If that line breaks through and easily exceeds 7.2 percent, then the mortgage interest rate will be 8%.’

Cris deRitis, deputy chief economist at Moody’s Analytics, also said MarketWatch rates could rise.

“Mortgage rates could rise significantly as global investors demand higher yields for fixed income assets,” explains deRitis.

“Historically, mortgage rate dispersion has only been around this level during periods of financial crisis, such as the Great Recession or the recession of the early 1980s,” deRitis added.

“The historical average is closer to 175 basis points.”

If rates do indeed rise that high for 30-year mortgages, the effect would be strongly felt in the housing market, Yun said.

“At 8 percent, the housing market will freeze again, with fewer buyers and far fewer sellers,” he said.

However, he added “as long as the labor market doesn’t turn negative, home prices will be stable – although home sales will take another step down.” If there is a recession in which jobs disappear, house prices will fall because some will be forced to sell while there are few buyers.’

Dailymail.com analyzed how the cost of an average home has risen over two years

Rates have not increased more than 8 percent since 2000, according to data compiled by Freddie Mac

Rising costs of homeownership have left 82 percent of real estate buyers stuck in their current homes because they closed their deals when rates were low, Freddie Mac officials said last month.

As a result, they are hesitant to move because it would require them to switch to a mortgage with a higher interest rate.

One in seven homeowners who have no plans to sell their homes cite current low interest rates as the main reason for staying.

The number of new homes offered in June was then 20 percent lower than in the same period last year.

Meanwhile, data from the Mortgage Bankers Association revealed that the average loan amount on a purchase application fell to $423,500 – the lowest level since January 2023.

Mortgage rates shot up last year in response to the Federal Reserve’s aggressive interest rate policy.

The Fed has raised its fund rate 10 times over the past 15 months to curb red-hot inflation.

Inflation in the US rose to 3.2 percent on an annual basis – a slight increase in July from the annual increase of 3 percent in June.

Prices rose 0.2 percent month-on-month through July, mainly driven by housing costs, including rent. This accounted for 90 percent of the monthly increase, according to the Bureau of Labor Statistics.

But in June, the bank announced a pause in increases to reflect inflation’s recent cooling — after falling to 4 percent.

However, the rates offered by lenders on homes are not directly tied to the Fed’s interest rates, but are instead determined by the yield on 10-year Treasury bonds.