That’s how high the average rate on a 30-year mortgage got this week—the most in years, according to daily data provided to The Balance.
Edging past the April peak of 6.19%, the average interest rate offered on a 30-year fixed mortgage shot up almost a quarter percentage point in one day as inflation fears fueled a surge in closely related 10-year Treasury yields ahead of the Federal Reserve’s next meeting on interest rates. The central bank is determined to tamp down the worst inflation in 40 years with higher borrowing costs that should curb spending, and in turn rebalance supply and demand.
The 6.20% is at least the highest since 2019 and likely much farther back. (Our data only goes back to 2020, but mortgage rates as measured by Freddie Mac, which has data back to 1971, were near their highest since 2009 last week.)
Higher borrowing costs have dramatically changed the math on buying a house, and are starting to impose a real drag on what has been a hot housing market during the pandemic.
For example, if you’d bought a median-priced home at today’s interest rate, your monthly mortgage payments would be about $1,917 a month. If you’d pulled the trigger in December 2020 when rates were just 2.89% by The Balance’s data, the payment would have been a much-more-affordable $1,301 with the same-priced home. (Both of those figures assume a 20% down payment, and are just for mortgage payments and interest, not counting things like insurance and taxes.)
That means you’d pay $377,082 in interest over the life of the loan at today’s rates, versus $155,385 with the rock-bottom pandemic-era rates.
Indeed, that stark contrast makes it easy to understand why the Fed raises borrowing costs to tamp down inflation. Loans and the things you buy with them become far less attractive when you have to pay more than twice as much.
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