We all know what the 30-year fixed rate is, but do we know where it is now and where it's been historically? Freddie Mac has been compiling data on mortgage rates since April 1971. On April 2, 1971, the rate was 7.3%, hitting an all-time high of 18.63% on October 9, 1981, and an all-time low of 2.65% on January 7, 2021.

Since January 7, 2021, the rate has been steadily increasing, landing where it is today at around 6.81%. Why the sharp jump in a short time? INFLATION! Bond prices move inversely to interest rates. Inflation causes interest rates to rise, leading to a decrease in the value of existing bonds. So as bond prices fall, borrowing costs rise.

Two scenarios seem to be taking place in 2023. Either the Fed is going to push the U.S. economy into a recession by excessive rate hikes or the economy will be resilient and shrug off the hikes and stave off a recession. The labor market remains strong and could be a catalyst for avoiding a recession.

In the coming weeks, we shall see if long-term rates are comfortable being elevated or if they will fall and come back down from these levels.

Bottom line: The uptick in home borrowing costs has affected affordability, but, historically, loan officers know that lofty rates aren't an obstacle in the consumers' aspirations to own a home. If rates increase further, mortgage professionals will steer borrowers to helpful programs, some to purchase smaller homes. But they will still buy homes.

Source: Mortgage Market Guide