Homebuyers Beware, Mortgages Back Above 7%

By Douglas A. McIntyre Published Feb 6, 6:45AM EST

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Homebuyers Beware, Mortgages Back Above 7% — © marchmeena29 / iStock via Getty Images

Mortgage rates rose above 7% a year ago. Then they dropped. It looked for a time that interest rates would continue to fall. A glance at Chase mortgage rates shows that a strong economy and the chance the Federal Reserve will not raise interest rates until June have pushed mortgage rates back up again.

The housing market is locked up. Homeowners who bought their homes a decade ago have 3% mortgages and do not want to sell them and try to find a new home on which the mortgage will be 7%. New buyers do not want to pay 7% at all.

Mortgage Rates

Mortgage rates

The difference between a 3% mortgage and a 7% one is staggering. According to the National Association of Home Builders, for a $471,000 home, the monthly payment is at 3% is $1,900. At 7%, that number is $2,900. At an additional $12,000 a year, the $471,000 home may be out of a potential buyer’s price range. Often, these people rent and wait, but for how long? Data show a third of people in the United States rent their homes. That number will likely rise if interest rates remain at or near 7%. (In these 10 states, saving enough to buy a house takes the longest.)

Currently, the Fed and the economy will not cooperate with people who want to buy homes at reasonable mortgage rates. The Bureau of Labor Statistics shows that the economy added 353,000 people in January. The unemployment rate was 3.7%. Consumer confidence is high. It may be an edge case, but the slowdown in shipping through the Panama Canal (drought) and Suez Canal (danger from missiles) could hurt supply chains and cause inflation as supply chain problems did early in the pandemic. A tight supply chain means higher prices for many goods.

The housing market is weak in terms of unit sales. That is because the balance of the economy is strong.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.