Mortgage Rates Surge to 20-Year Highs in 2023

Mortgage rates have been a topic of interest for many people, especially those who are looking to buy a home or refinance their existing mortgage. According to Mortgage News Daily, the average 30-year fixed mortgage rate as of October 17, 2023, is 7.80%. This is the highest rate recorded since the year 2000.

The COVID-19 pandemic had a significant impact on mortgage rates. In response to the pandemic, the Federal Reserve introduced a number of new monetary policy tools, including purchases of agency mortgage-backed securities (agency MBS). During this period, the Federal Reserve lowered interest rates to near-zero levels in an effort to stimulate economic growth. As a result, mortgage rates fell to historic lows in 2020 and 2021. The Fed's actions helped push mortgage rates below 3% and kept them there during the pandemic. However, with inflation running high, mortgage interest rates surged to their highest levels since 2002 in 2022.

Despite the high mortgage interest rates, there is still demand for housing. According to MBA, housing inventory will remain tight enough for home prices to keep appreciating for the next several years.

During 2022, mortgage rates fluctuated significantly. According to Freddie Mac’s records, the average 30-year rate jumped from 3.12% in January of 2022 to a high of 6.5% at the end of January 2023.

The variance between COVID-19 rates and current rates has caused a drastic decline in current mortgage demand. Some economists have theorized that mortgage originations could surge if another recession occurs as this would force rates back down.