Connect with us

Hi, what are you looking for?


2023 begins with mortgage rates twice as high as one year ago

Photo by Joe Raedle/Getty Images

Depressing news for those who want to purchase a home and live out the American dream; mortgage rates are double what they were a year ago. The 30-year fixed-rate mortgage averaged 6.48% for the week ending on January 5, up from 6.42% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.22%.

As a result, “Mortgage application activity sunk to a quarter-century low this week as high mortgage rates continue to weaken the housing market,” said Sam Khater, Freddie Mac’s chief economist.

Khater hopes that “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.”

However, mortgage rates increased just last week, “after a slight increase the week before interrupted six straight weeks of falling rates.” Mortgage rates rose throughout most of 2022, due to the Federal Reserve’s unprecedented campaign of “harsh interest rate hikes to tame soaring inflation.”

“Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market,” said Khater. “Moreover, if rates continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates.”

Would-be buyers have little appetite to get into the market now. That’s partly because there are few homes available to buy, since most sellers aren’t interested in parting with the ultra-low mortgage rates that were available for the past few years.

“With the 30-year mortgage rate at 6.4%, the buyer of a median-priced home is looking at a monthly payment that is 60% higher than last year,” said George Ratiu,’s manager of economic research.

US job openings totaled 10.5 million in November, but “with more than 10 million open jobs and still not enough applicants to fill them, the labor market would have to experience a sharp and significant drop to move the needle on spending,” said Ratiu.

“This scenario is more likely if corporate executives overreact to the recession chatter and preemptively cut payrolls, which would create a self-fulfilling downward spiral.”

“We may have to wait until the start of the spring shopping season for more clarity on the direction of housing markets this year, especially as both buyers and sellers are pulling back from the marketplace,” added Ratiu.