US mortgage rates jump to 7.09%, highest since 2002

Townhomes are under construction on July 19, 2023, in Mundelein, Illinois. With homeowners reluctant to sell their homes and give up their existing low mortgage rates the demand for new homes has spiked. (Scott Olson/Getty Images/TNS)

U.S. mortgage rates jumped to the highest level in more than 20 years.

The average for a 30-year, fixed loan was 7.09%, up from 6.96% last week and the highest since April 2002, Freddie Mac said in a statement Thursday.

The recent climb in borrowing costs, and home prices that are pumped up by a critical inventory shortage, have pushed housing affordability to its worst point since 1984, according to Black Knight Inc. Sales of previously owned homes have declined as the lack of listings, escalating costs and worries over the economy hold back many would-be buyers.

“Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales,” Sam Khater, Freddie Mac’s chief economist, said in the statement.

Federal Reserve policymakers have hinted that more interest-rate hikes could be needed to keep inflation at bay, meaning a significant break for borrowers may be elusive for some time.

Monthly payments on a $600,000 mortgage at the current 30-year average would be about $4,028. That’s up from $2,601 at the start of last year, before the Fed started raising the benchmark rate.