By Ethan Letkeman
The 30-year fixed mortgage rate surged to 6.7 percent on Thursday, more than double what it was a year ago.
According to data from Freddie Mac, the 30-year fixed mortgage rate jumped by 0.41 percent from a week ago. A year ago, the rate was at 3.01 percent. It is also the highest it has been since July 2007, when the subprime mortgage crisis was in its early stages.
While the federal reserve recently hiked interest rates between three and 3.25 percent, the highest since 2008, the mortgage rate is not directly tied to the Fed but rather the ten-year U.S. Treasury bond yield.
As Breitbart New’s Economics Editor John Carney explains:
The Federal Reserve does not directly control mortgage rates. Instead, it targets the overnight lending rate for banks and pays interest on overnight reserve levels. Longer-term interest rates reflect the expected path of short-term rates over time. Mortgage rates, in turn, tend to reflect the direction of long-term rates, especially the yield on 10-year Treasury bonds.
The ten-year bond yield on Thursday dropped to 3.75 percent after it was recorded at four percent on Wednesday — the highest it had been at in over a decade, according to the Wall Street Journal.
The rise in mortgage interest rates comes at a time when the U.S. housing market is already slowing down. In August, home sales were down 12.7 percent from the previous month and down 29.6 percent from a year ago, Breitbart News noted.
Increased mortgage rates may also spook existing homeowners from selling since they would tie themselves to a higher rate.
According to Bankrate.com, if an individual were to purchase a $500,000 home with a 20 percent downpayment today, they would expect to pay approximately $259,000 in interest over 30 years. However, if they purchased a home for the same price and down payment when President Joe Biden was inaugurated in January 2021, they would only be paying $189,400 in interest over 30 years.