Mortgage Rates Spike To Hit Highest Levels In Two Decades

3 min readAug 22, 2023

Key takeaways

The average 30-year fixed-rate mortgage is now 7.48%, the highest since 2000
However, house prices have remained buoyant due to lack of housing inventory
With bond yields at a decade high, it’s unclear when mortgage rates might come down again

If you’re looking to buy a home in the U.S. at the moment, you’ll know how much more expensive mortgages have gotten — and unfortunately, that’s not letting up any time soon. Average 30-year fixed mortgages hit fresh highs last week not seen in two decades — with no end in sight to homeowners’ financial pain. Here’s what you need to know.

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What’s happening with mortgage rates?

Mortgage rates jumped up again at the start of this week, with the average 30-year fixed-rate mortgage hitting 7.48% — the highest level since November 2000.

The cause behind this sudden jump? Bond yields, which spiked after investors were concerned that high interest rates and inflation would take longer to bring down than previously anticipated. The ten-year Treasury bond yield, which is closely tied to mortgage rates, is currently at 4.305%.

This drastically reduces affordability for would-be homeowners, given that the average rate last year was 5.5%. The average mortgage holder would pay $420 more monthly in repayments on a $400,000 home with a 20% down payment.

When could they come down again?

Unfortunately, we have more bad news. The U.S. property market has suffered from a supply shortage in recent years as housebuilding slowed and the era of cheap credit fueled a house-buying boom, causing house prices to soar.

Now, the U.S. is in a shortage situation, with homeowners who secured ultra-low rates not wanting to move any time soon. Redfin data found total housing inventory dropped 15% year over year to an all-time low in June, leaving prospective buyers with high rates and high prices.

One option is an adjustable rate mortgage loan (ARM), which is a standard product in other countries. The average rate on a five-year ARM was 6.2%, which could tempt homebuyers to take the plunge. The Mortgage Bankers Association said ARM applications’ share had risen to 7% this year, compared to less than 2% in 2020.

The bottom line

Unfortunately, with bond yields up and turmoil over China’s economic situation having a knock-on effect on the markets, mortgage rates don’t look like they’re heading south for some time. An ARM might be a better option for those looking to move now, and AI investing can help you save up for a bigger down payment.

Inflationary winds are blowing, but Q.ai’s Inflation Protection Kit helps you set a sturdy financial sail. Anchored by assets such as precious metals and TIPS that can weather the inflation storm, the Kit has the added benefit of an AI algorithm that adjusts your holdings to help keep you on course.