Mortgage rates hit their highest point since 2000

Mortgage rates jumped Monday, following a rise in bond yields driven by investors’ concerns that high interest rates and inflation will linger longer than expected.

The average rate on the popular 30-year fixed mortgage hit 7.48%, the highest level since November 2000, according to Mortgage News Daily. It has risen 29 basis points in just the past week.

“Investors just aren’t seeing the kind of deterioration in economic data that they expected,” said Matthew Graham, chief operating officer of Mortgage News Daily.

He noted that the Federal Reserve wants to see the same deterioration before considering a policy shift, and that shift would likely favor short-term rates first.

“The net effect is that longer-term rates like 10-year Treasury yields and mortgages are bearing the brunt of the market’s negative rate sentiment. This won’t change until the data forces the Fed to start talking about the first rate cut.”

Higher rates are hitting potential homebuyers hard, adding insult to the injury of pandemic-inflated home prices. Rates set more than a dozen record lows in 2020, setting off a homebuying spree that caused prices to rise over 40% from the start of the pandemic to the summer of 2022. Prices pulled back slightly at the end of last year but are now rising again due to still-strong demand and very lean supply.

Higher mortgage rates exacerbate the supply situation. Current homeowners are reluctant to list their homes for sale because the vast majority of them have rates around or below 3%. To move to another home would mean more than doubling that rate. It has created what is now being called “golden handcuffs” among potential sellers.

For a buyer today, the difference in affordability from just a year ago is dramatic. The average on the 30-year fixed last year at this…