Average 30-year fixed mortgage rate rises to 7.23%, highest since 2001

The average long-term U.S. mortgage rate rose for a fifth straight week to 7.23% — the highest it has reached since June 2001, according to data released Thursday by mortgage giant Freddie Mac.

The average increased from 7.09% last week, which had marked the first time the measure had eclipsed 7% since November.

The summer surge in rates has increased the monthly cost of homeownership by hundreds of dollars, when compared with the average at this time last year of 5.55%. Higher rates have made buying a house more expensive for Long Island homebuyers, who are also dealing with record home prices. The median price was $725,000 in Nassau County and $575,000 in Suffolk County last month. 

 Mortgage rates have risen as data has shown continued signs of strength for the U.S. economy, with the U.S. unemployment rate at 3.5% in July. If the Federal Reserve decides to hold its benchmark interest rate at a higher level for a longer period of time, that could make borrowing more expensive, including for home loans.

Mortgage rates tend to move in the same direction as the yield on 10-year U.S. Treasurys, which reached its highest point since 2007 on Monday before falling over the past few days.

Investors' demand for U.S. Treasurys, expectations about inflation and the Fed's actions all influence borrowing costs for home loans. Mortgage rates typically rise during periods of inflation and fall when there are greater fears about a recession. 

 Fewer economists are predicting a recession within the next year than had been earlier this year, according to Reuters.  

“Indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term,” Sam Khater, chief economist at Freddie Mac, said in a statement. “As rates remain high and [the] supply of unsold homes woefully low, incoming data shows that existing home sales continue to fall.”

 A few decades ago, rates were routinely higher. From June 1991 through May 2001, the 30-year fixed rate had averaged 7.81, wrote Jessica Lautz, deputy chief economist at the National Association of Realtors, in commentary published online Thursday.

She noted the major difference today is that the number of existing homes for sale nationwide, excluding new construction, has fallen to nearly half the level it was back in June 2001, the last time rates were this high. Home price growth has also outpaced wage growth during that time, hurting affordability.

The increase in rates in the past year has driven up buyers’ potential monthly payments. A new homeowner with a $500,000 mortgage would pay 19% more, or $3,404, for a 30-year fixed mortgage at this week’s rate compared with the average at this time last year. That excludes taxes and insurance.

“Until rates come down, this will hurt buyers’ opportunities to enter the market and the willingness of sellers to make a needed move,” Lautz wrote.

On Long Island, the number of homes for sale was 5,089 at the end of July, which was down nearly 30% from the previous year. The number of sales in Nassau and Suffolk fell a combined 23% last month compared with July 2022.

Steve Probst, branch manager at Fairway Independent Mortgage Corp. in Hauppauge, said he has actually seen an uptick in business lately, with clients who had first reached out earlier this year finally entering into contracts to buy homes.

“I’ve been dead for the last several months and all of a sudden now I’m extremely busy. A lot of old business that I was working on is now coming to fruition,” he said. “I think some people are just getting tired of sitting on the sidelines and waiting.”

Probst said the lack of listings has been the key factor driving home prices on Long Island, and he doesn’t expect the current level of mortgage rates to fix the supply shortage. He noted homeowners who bought or refinanced their mortgages in the past few years have resisted moving and trading in mortgage rates around 3% for loans with 7.25% rates.

“There’s still going to be a shortage of inventory and that’s going to keep prices bolstered.” Probst said. “I don’t think they’re going to be skyrocketing, but they’ll remain consistent.”

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.