US Mortgage Rates Soar Past 7% for the First Time Since 2002

“With mortgage rates continuing to rise, the purchasing power of buyers is shrinking,” Edward Seiler, the associate vice president of housing economics at the bankers association, said in a statement. The median loan amount in September was $305,550, down from the February peak of $340,000, its highest point since the inception of the association’s index in July 2009.

Liz Rossof, a real estate broker with Re/Max Professionals, has witnessed that dynamic with the home buyers she works with in northwest Denver. She had clients who qualified for a $675,000 mortgage in January — but by May, with rates about two percentage points higher, their housing budget had dropped more than $100,000. At the same time, home prices were still rising, so her clients felt extra squeezed.

“It was hard for them,” Ms. Rossof said. “A lot of lenders are like, ‘Rates are still historically low,’” she said. “But that doesn’t mean much to the buyer who is now paying three times as much interest as they were.”

The frenzied mood of 2021 — and even early this year, when home buyers rushed into the market to try to lock in low interest rates — had begun to fizzle once rates crossed the 5 percent mark in late April and early May, Ms. Rossof said. And now, two percentage points higher, buyers are increasingly reluctant to make a move — or they’ve been priced out altogether.

Indeed, the volume of mortgage locks in September — that is, when applicants lock in a particular rate — fell nearly 60 percent from the same month last year, according to Black Knight, a data firm that tracks the mortgage market. Locks on mortgages for home purchases were down nearly 30 percent, while refinancing activity was 93 percent lower.

“I think we are all a little shocked at how abruptly interest rates went up,” she added. “In terms of buyer activity, we definitely see a lot of hesitancy. They are bummed because they feel they missed out.”