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The average interest rate for the popular 30-year fixed-rate mortgage was 8%, according to data as of Wednesday morning Daily Mortgage News. This is the highest value since mid-2000.
The milestone came as bond yields shot to levels not seen since 2007. Mortgage interest rates are loosely based on returns 10-year US Treasury bonds.
Interest rates rose sharply this week and last as investors digest more economic data. On Wednesday, housing starts increased in September, although not as much as expected, according to the U.S. Census Bureau.
The number of building permits, an indicator of future construction activity, fell, but less than expected. Last week, retail sales were far higher than expected, creating more uncertainty about the Federal Reserve’s long-term plan.
According to the Mortgage Bankers Association, these higher interest rates have led to a collapse in mortgage demand, with applications falling nearly 7% last week compared to the previous week.
“Here’s another milestone that seemed extreme just a few months ago,” said Matthew Graham, chief operating officer of Mortgage News Daily. “The fact is that many borrowers have already seen interest rates above 8%. However, many borrowers are still seeing interest rates in the 7s due to buybacks and discount points.”
Builders use buybacks to help customers afford their homes. They do this through their mortgage subsidiaries.
While they used the financing instrument very sparingly in the past, according to industry sources, it is now the most important incentive for builders.
“Although our mortgage lender has offered loans at slightly below-market interest rates for most of this cycle (simply to be competitive), the full point buyback for the 30-year term of the loan, which we recently referred to as a construction incentive, is not that Case.” “something we have done in previous cycles, at least not on the broad, majoritarian basis that we do today. It may have been found in extremely limited quantities at selected properties in the past,” said a spokesperson for DR Hortonthe largest home builder in the country.
The average interest rate for the 30-year fixed rate was just 3% just two years ago. To put it in perspective, a buyer purchasing a $400,000 home with a 20% down payment would have a monthly payment of almost $1,000 more today than it did two years ago.
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