It's Been Over 20 Years Since Americans Have Seen Mortgage Rates This High

hands reaching out with one hand grabbing a house key
Via Pxhere
Adé Hennis
September 22, 2023

In late August, mortgage loan applications fell to the lowest amount in 28 years – and it may have something to do with mortgage rates.

The average interest rate on a 30-year fixed rate mortgage – the most common home loan in the U.S. – reached 7.31 percent in August, which is the highest it’s been since December 2000.

The spike in mortgage rates is highly correlated with the increase in yield of government bonds. As inflation increases interest rates, or when there’s expectations that it will, the yield for government bonds increases as well. This means that high inflation will likely mean high mortgage rates.

Mortgage rates are expected to remain high throughout 2024, because inflation is expected to remain above the Federal Reserve’s long term target of two percent. It’s unlikely if they’ll drop anytime soon to the low levels mortgage lenders offered in 2020.

While the spike in mortgage rates makes it a less ideal time to purchase a home, being better prepared for when rates do fall back down can benefit potential homeowners in the future.

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