For the first time in more than two and a half years, the average 30-year, fixed-rate mortgage is more than 9%.
The average hit 9.03% this week, up from 8.85% a week ago, says the Federal Home Loan Mortgage Corp.
A year ago, the average was more than two percentage points lower: 6.86%. The rate hasn't been consistently over 9% since September 1991.
Get used to it. Economists expect the average to march into double digits next year.
"We'll see 10% mortgages by November 1995," says David Lereah, economist for the Mortgage Bankers Association.
Mortgage lenders and bond buyers want higher yields because they fear inflation.
Surprisingly, higher mortgage rates haven't yet dampened the enthusiasm of homebuyers. And economists don't expect them to hurt until fixed-rate loans hit double digits.
Why? Homebuyers who find fixed loans too rich are signing up for a variety of adjustable loans at lower rates - fixed for anywhere from one to 10 years before adjusting.
The share of adjustable-rate mortgages has doubled since February, when the Federal Reserve began hiking interest rates to head off inflation.
Adjustable-rate loans now represent 43% of mortgages, up from 20% in February.
One-year adjustable mortgage rates averaged 5.88% this week vs. 5.77% last week.
For every percentage point rise in fixed rates, economists say 50,000 homebuyers can no longer qualify for a mortgage. But Lereah says, "adjustable rates are easing the blow."
Rates on the rise Avg. 30-year fixed rate 10/27 9.03%
