Andrew Dehan | Bankrate.com (TNS)

The average 30-year fixed mortgage rate touched 8% on Thursday, according to Bankrate data, a level not seen since the year 2000.

Over the past several weeks, the 30-year rate has been on the cusp of 8%, backed off, then picked up steam again — a confounding pattern somewhat atypical of this time of year, when home sales and mortgage activity begin to slow.

Why mortgage rates are so high

There are several variables that have prompted the 30-year rate’s march toward 8%:

—The 10-year Treasury yield: The rates on fixed-rate mortgages are tied to the yield on 10-year Treasury notes. When this bond yield goes up, so do mortgage rates, with a margin. In general, higher yields signal confidence in the economy. If investors foresee trouble, they’ll buy lower-risk Treasurys, which drives down yields and, in turn, fixed mortgage rates. Against that grain, the yield has risen rapidly as of late, inching toward 5% as of Oct. 19, due partly to economic uncertainty and the Israel-Hamas war.

—The Federal Reserve: The Federal Reserve sets the federal funds rate, the rate at which banks loan to each other overnight to maintain Fed reserve requirements. While this rate isn’t directly linked to the 30-year mortgage, when the Fed raises it, borrowing costs across the board rise. The central bank has been increasing this rate for some time to control inflation.

—Inflation: Inflation can buffet mortgage rates up or down, and lately it’s the latter. When inflation is too high, investors demand higher bond yields, which pressures mortgage pricing overall. (Your lender, on the other hand, might price loans lower to attract borrowers coping with elevated expenses.) The September Consumer Price Index came in at 3.7%, above the Federal Reserve’s target of 2%.

The interplay between these factors has brought on a surge in the 10-year Treasury, along with mortgage rates at 23-year highs.

“Typically when global events are uncertain and tumultuous, as what’s taking place in the Middle East, money flows into bonds and rates are a beneficiary,” says James Sahnger of Jupiter, Florida-based C2 Financial Corporation. “Today though, inflation has not shown signs of pulling back and continued excess spending in Washington is not helping. For rates to start showing some relief, we will have to see sustainable declines in economic data.”

Of course, some borrowers were already receiving rates above 8%, depending on factors like their credit score and finances, location and loan type. As of Thursday morning, Bank of America, Pennymac, Rocket Mortgage and others were advertising APRs higher than 8%, some even over 8.5%.

Americans recently cited high mortgage rates, rather than high home prices, as the No. 1 reason to hold off on buying a home, according to Fannie Mae’s Home Purchase Sentiment Index.

Indeed, many homeowners aren’t selling because they’re locked in at lower rates, and many buyers aren’t purchasing because of higher rates and prices, compounded by limited choices on the market.

Home sales were down by 2% year-over-year in September, according to the National Association of Realtors (NAR).

“As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” says Lawrence Yun, NAR chief economist. “The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains.”

Have mortgage rates hit their peak?

The average monthly payment on a 30-year mortgage has increased substantially in the last two years. While home prices have been out of reach for many for some time, mortgage rates only began rising in 2022, following a period of rock-bottom rates during the pandemic.

Now at 8%, the average monthly payment has increased to $2,806 based on the latest reported median home price — a 91% increase over 2021.

Is 8% the ceiling, though? Some forecasters are calling for rates to decrease by year-end. The Mortgage Bankers Association currently expects the 30-year rate to land at 7.2%, up from an estimate of 6.6% a month ago. Fannie Mae researchers predict 7.3%.

“I never call tops or bottoms except to say that if we haven’t seen the top, we are very close to it,” says Joel Naroff, president of New Jersey-based Naroff Economics.

“Rates will eventually come down, but I don’t see it happening without some serious Fed intervention,” says Sean Salter, associate professor of Finance at Middle Tennessee State University. “Rates will continue to rise until there’s a significant reason to change the market’s mind.”

©2023 Bankrate.com. Distributed by Tribune Content Agency, LLC.

Have you been trying to cut back on red meat? It could help you avoid a serious disease that affects tens of millions of people across the U.S.

People who eat two servings of red meat a week may have a higher risk of developing type 2 diabetes compared to people who eat fewer servings, and the risk increases with greater consumption, according to a new study from Harvard T.H. Chan School of Public Health.

The Harvard researchers also found that replacing red meat with healthy plant-based protein sources — such as nuts and legumes — or modest amounts of dairy was tied with a lower risk of type 2 diabetes.

“Our findings strongly support dietary guidelines that recommend limiting the consumption of red meat, and this applies to both processed and unprocessed red meat,” said first author Xiao Gu, a postdoctoral research fellow in the Department of Nutrition.

Type 2 diabetes is a major risk factor for cardiovascular and kidney disease, cancer, and dementia.

While previous studies have found a link between red meat consumption and type 2 diabetes risk, this study now adds a greater level of certainty about the association.

The researchers analyzed health data from 216,695 participants from the Nurses’ Health Study (NHS), NHS II, and Health Professionals Follow-up Study. The participants were asked about their diet in food frequency questionnaires every two to four years, for up to 36 years. During this time, more than 22,000 participants developed type 2 diabetes.

Related Articles

‘Exciting’ glioblastoma study: Researchers create virus that effectively targets brain cancer

Crohn’s disease and colitis: Advocates strive to raise awareness, break stigma for ‘invisible’ illnesses

PrEP, a key HIV prevention tool, isn’t reaching black women

Insurers often shortchange mental health care coverage, despite a federal law

Bipolar disorder is little researched, but doctors at Johns Hopkins aim to change that

The scientists found that consumption of red meat — including processed and unprocessed red meat — was strongly linked with increased risk of type 2 diabetes.

Participants who ate the most red meat had a 62% higher risk of developing type 2 diabetes compared to those who ate the least.

Every additional daily serving of processed red meat was linked with a 46% greater risk of developing type 2 diabetes, and every additional daily serving of unprocessed red meat was associated with a 24% greater risk.

The researchers also estimated the potential effects of substituting one daily serving of red meat for another protein source. They found that substituting a serving of nuts and legumes was linked with a 30% lower risk of type 2 diabetes, and substituting a serving of dairy products was associated with a 22% lower risk.

“Given our findings and previous work by others, a limit of about one serving per week of red meat would be reasonable for people wishing to optimize their health and wellbeing,” said senior author Walter Willett, a professor of epidemiology and nutrition.

The researchers also said swapping red meat for healthy plant protein sources would help reduce greenhouse gas emissions and climate change, and provide other environmental benefits.

The red meat and type 2 diabetes study was published on Thursday in The American Journal of Clinical Nutrition.