Fed Rate Hike Sends Mortgage Rates Soaring Above 7%

The Federal Reserve has raised its benchmark interest rate by a quarter percentage point to 3.75% to 4%, and mortgage rates have followed suit, reaching an average of 7.11% for a 30-year fixed mortgage as of September 24.

This increase in mortgage rates is putting additional pressure on prospective homebuyers, making it more expensive to buy a home, even if the price stays the same.

For example, a $300,000 30-year mortgage at 7% has a principal-and-interest payment of roughly $1,996 a month, compared to about $1,896 a month at 6.5%, a difference of around $100 each month before taxes, insurance, and other housing costs.

Higher rates can also reduce the amount that buyers can afford to borrow, potentially slowing down demand for homes.