How rising mortgage rates affect home-buying power
Interest rates on home mortgages are rising rapidly across the United States, which seems to be slowing most housing markets. (Some, like the market here in Corvallis, have been less affected. Give it time.)
The average mortgage rate for a 30-year loan was about 3.0% at the start of the year; today, it’s at 6.245% â even for somebody with an excellent credit score over 800.
Kim and I are fortunate that we bought our home in 2021 instead of waiting until 2022. Mortgage rates weren’t actually a factor during our deliberations last year; the historically low rates were simply an added bonus for buying when we did.
When we purchased our home last August, we took out a $480,000 mortgage at 2.625%. We didn’t hit the precise bottom of the mortgage market (that was early January 2021, when we might have had a loan for 2.5%), but we came close.
Here’s a chart from the Federal Reserve that shows mortgage rates from the past 2.5 years.
And here’s a chart that shows mortgage rates for the past 50+ years:
Mortgage rates have hovered at historic lows since the Great Recession of 2007-2009. And rates fell even further during the COVID pandemic. (These low rates are partly responsible for the blazing-hot housing market of the past two years.)
What do these rising mortgage rates mean to actual home buyers? Let’s use our situation as a representative example.