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Last week, the mortgage interest rate for a 30-year, fixed-rate mortgage averaged 7.57 percent, according to the Federal Home Loan Mortgage Corp. (Freddie Mac), up from 7.49 percent the week before.

The rate has been above 7 percent for nine consecutive weeks and has reached the highest level since December 2000, when the rate was 7.65 percent.

Mortgage rates, more than home prices, are now the greatest barrier to home ownership, Yahoo Finance said. The high rates keep all but the most well-off buyers out of the market and dissuade current owners from selling if they would need a mortgage to buy a new home—the so-called “mortgage lock effect.”

High rates were the chief cause of potential buyers’ discouragement, surpassing high home prices for the first time, a Freddie Mac survey found. Among respondents, 84 percent said this is a bad time to buy a home, the highest proportion on record.

“For the fifth consecutive week, mortgage rates rose as ongoing market and geopolitical uncertainty continues to increase,” Sam Khater, Freddie Mac’s chief economist, wrote in a statement announcing the higher rate.

“Mortgage rates are expected to remain elevated,” analyst Hannah Jones told YF. The mortgage lock effect “is going to be the mode of operation until something shifts substantially,” such as “inflation has made big improvements.”

While inflation has eased, core inflation—which ignores food and fuel prices—remains stubborn. That, coupled with a surprisingly strong September jobs report, has raised speculation that the U.S. Federal Reserve could bump up its key rates by a quarter point when it meets at the end of this month.

“The robust employment picture just won’t quit,” Jonathan Miller, CEO of real estate consulting firm Miller Samuel, said to YF. “It works against the housing sector, where sales continue to be pummeled by higher mortgage rates.”

“The odds are rising for an 8-percent [mortgage] rate,” he warned.

TREND FORECAST: As long as the U.S. Federal Reserve maintains its “higher for longer” interest rate policy, mortgage rates will not decrease substantially.

Banks are cash-strapped as hundreds of millions of dollars in deposits have transferred to U.S. Treasuries, CDs, and money market funds. While it adds up to not much, banks are paying higher interest rates to keep and hold depositors, and regulators are pressing banks to set aside larger cash reserves against bad loans. 

The mortgage lock effect will persist, keeping homes for sale scarce and prices high at least through the winter and very possibly through the middle of 2024. That will keep yet another cohort of American households from being able to realize the dream of home ownership.

Illustrating the downward pressure on housing as a result of high interest rates, the monthly National Association of Home Builders/Wells Fargo Housing Market Index reported today that as a result of rising mortgage rates which hit a 23-year high, homebuilder sentiment fell to its lowest level since January. 

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