Here's What 8% Mortgage Rates Could Mean for the Housing Market
What seemed impossible in January is now close to becoming reality: Could mortgage rates pass 8%?
That’s the question buyers, sellers and experts who follow Freddie Mac's benchmark weekly rate survey are asking as the U.S. housing market enters the final weeks of a particularly rough year. Since the beginning of 2023, mortgage rates have jumped from 6.48% to 7.63%. Rates have risen by half a percentage point in the last six weeks alone.
As a result, mortgage applications have fallen to a 28-year low, and homes are selling at the slowest pace since 2008. Buyer affordability, which was already an issue at the end of 2022, has eroded to the point where the annual income required to afford a typical home is now nearly 15% higher than a year ago.
So what’s next?
Earlier this week, some media outlets reported mortgage rates had indeed touched 8%, but data from Freddie Mac, which publishes a weekly average of rates borrowers who have excellent credit and make a 20% down payment can expect to see when applying for a home loan, came in slightly lower. (Freddie Mac is the widely used rate standard.)
There’s no way to definitively predict whether these rates will climb to, or past, 8%; there are too many factors that influence them to say for sure. But that uncertainty, according to Chen Zhao, economics research lead at brokerage Redfin, also means it’s “well within the range of possibility that rates go to 8% or more” — bad news for anyone planning on buying or selling a home.
