Mortgage rates in the US have risen above 7% for the first time since 2002

“As mortgage rates continue to rise, the purchasing power of buyers is shrinking,” Edward Sealer, associate vice president for housing economics at the Bankers Association, said in a statement. The average loan amount in September was $305,550, down from a February peak of $340,000, the highest point since the Association’s index began in July 2009.

Liz Rosoff, a realtor with Re/Max Professionals, has experienced this dynamic with the homebuyers she works with in northwest Denver. She had clients eligible for a $675,000 mortgage in January — but by May, with rates nearly two percentage points higher, their housing budget had fallen by more than $100,000. At the same time, housing prices continued to rise, so their clients felt additional pressure.

“It was hard for them,” Ms. Roussoff said. “A lot of lenders are like, ‘Interest rates are still historically low,'” she said. “But that doesn’t mean much to a buyer who is now paying three times the interest he was paying.”

The frenzied mood of 2021 — and even early this year, when homebuyers flocked to the market to try to secure low interest rates — began fading once prices crossed the 5 percent mark in late April and early May, Roussoff said. . And now, two percentage points higher, buyers are increasingly reluctant to make a move — or priced out entirely.

In fact, the volume of mortgage locks in September — when applicants lock in a certain rate — was down nearly 60 percent from the same month last year, according to Black Knight, a data company that tracks the mortgage market. Mortgage locks for home purchases are down about 30 percent, while refinancing activity is down 93 percent.

“I think we were all a little shocked by the extent of the sudden rise in interest rates,” she added. “In terms of buyer activity, we definitely see a lot of hesitation. They are upset because they feel they have lost everything.”