Mortgage rates are at a 21-year high. Here’s what that means for you.
VoxAug 29, 2023
The Facts
Data published Thursday by Freddie Mac shows that the average 30-year mortgage in the US has an interest rate of 7.23%, the highest since 2001. Rates have risen far beyond the yield of the 10-year Treasury bond, which mortgage rates are typically benchmarked to.
Mortgage rates stood at 7.09% last week, the first time rates crossed the 7% mark in 2023. The Mortgage Brokers Association has also said that mortgage applications have dropped to a 28-year low.
The Spin
Narrative A
The Fed's inflation crusade has put the prospect of affordable housing on the chopping block, as the crossing of the 7% threshold pushes homeownership beyond the reach of the average homebuyer. The prospect of rising interest rates and low supply could make housing a uniquely expensive commodity. There were predictions that the Fed would be lowering rates these years, but its continued hikes instead drive mortgage rates higher and higher.
Narrative B
The issue of affordable housing goes well beyond mortgages, as America's housing strategy has failed to keep up with housing demand. In spite of high demand, the number of housing units available continues to fall because of policymakers' prejudice against high-density housing, favoring more expensive single-family dwellings. Homeownership is not the solution to the housing crisis, and promoting high density, reasonably-priced development could help alleviate it.