What to Expect as Mortgage Rates Hit Highest Levels in over 20 Years

October 11, 2023, By: Susan Kadilak


Last week, the average 30-year fixed mortgage rate reached 7.8%. This is their highest level in over 20 years. Recently, my own clients, who have been relentlessly house hunting since August, had to deal with the shock of the promise of seeing a 6.9% interest rate on September 10th only to have the rate skyrocket by almost a full point when we got an offer accepted on October 5th. In just a few weeks, the payment on a $600k loan went up by $409 per month, or nearly $5,000 per year.

High rates are making housing more expensive for those who can still afford to buy, while simultaneously pushing other buyers out of the marketplace. According to CNBCAs rates have moved higher, mortgage demand has dropped to the lowest level since 1996.

The Fed has signaled that interest rates will remain elevated for “some time”. Fed Governor Michelle Bowman recently said  "Inflation continues to be too high, and I expect it will likely be appropriate for the (Fed) to raise rates further and hold them at a restrictive level for some time." The recent robust jobs report supports the expectation that these high rates will be the “new normal”, at least for a little while.

 

While Middlesex County remains a strong seller’s market, I’m personally seeing small signs of weakening demand start to pop up. Recently I encountered 2 different properties where the sellers accepted an offer with a home sale contingency, before the buyer actually put their home under agreement. This has been an unheard of scenario over the last few years.

 

I have also personally seen home builders increase the buyer agency fee offered on their properties to entice agents to bring their clients. While these examples do not mean we’re headed for a buyer’s market, an increasing number of instances like these can signify that we are heading for a little bit more balance between buyers and sellers.