The mortgage rate has broken the recent 4.85% high of October 18, 2018, and surpassed the 6% line for the first time since 2008.
Mortgage rates were in double digits for most of the 80s. The rates have been falling from 18.5% since 1981.
The 1980s were different—Plus the Federal Reserve was fighting double-digit inflation in the early 1980s. Mortgage rates ultimately peaked at 18.5% as a result.
The average cost of a home today is $407,600. If the same 18.45% rate were applied—along with a 20% down payment—the monthly cost would be around $5000. The total payments after 30 years would be approximately $2 million.
With unexpectedly rising inflation, we can’t say for sure. We will definitely not reach the same level. But it seems like we are getting close.
The CPI announcement on September 13th was harsh for the economy—the worst day for US stocks in 2 years, and now mortgage rates have reached 6.19%.
The Fed seems well committed to raising interest rates at the upcoming meeting on September 20–21. The meeting could push them even higher.