Today’s mortgage rates haven’t looked like this in over 20 years

Rates are approaching 7%

Last week, mortgage rates closed in on 7% — a level realtor.com reported has not been seen in 20 years. The rate hike led to monthly mortgage payments rising $900 on a typical home compared to nine months ago. According to Bank Rate, it is another sign of the end of the decade-long period of low rates that followed the Great Recession.

It all comes down to the Federal Reserve.

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The central bank has been aggressively taking action to fight inflation. But the reserve’s recent third consecutive rate hike is reportedly creating pressure on mortgage rates.

“Only when inflation calms down will we see mortgage rates begin to steady,” Lawrence Yun, chief economist for the National Association of Realtors, told Bank Rate.

For comparison, the benchmark 30-year fixed-rate mortgage was 3.17% just a year ago. Four weeks ago, the mortgage rate was 5.78%. Now it is 6.73%.

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The inflation that the Federal Reserve has been attempting to curb has been high this year. Time.com reported that the consumer price index reached 8.5% in July. The inflation has been consistently raising mortgage rates throughout the year.

“Inflation is absolutely in the driver’s seat, particularly as it pertains to mortgage rates,” Odeta Kushi, deputy chief economist at First American Financial Corporation, told time.com. “Until we get some sustained evidence that inflation is beginning to recede, the upward pressure on mortgage rates will remain.”

According to Time, the softened demand for homes caused by high mortgage rates may be advantageous for some hopeful home buyers. While high mortgage rates hardly manifest bountiful buyers’ markets, the consequential softening demand for homes may lead to more opportunities to land a deal on an available home or additional concessions from an interested seller.

“It’s always a good time to buy a home, if that’s what is important to you,” Eileen Derks, head of mortgage at Laurel Road, told Time. “It’s just about doing your research and making good informed decisions.”