Mortgage rates climb to 6% for the first time since 2008

The average interest rate on a 30-year home loan has hit 6% for the first time since 2008, the Mortgage Bankers Association said Wednesday,.

The 6% rate is "essentially double what it was a year ago," Joel Kan, associate vice president of economic and industry forecasting at the trade group, said in a statement Wednesday. The higher mortgage rate has "contributed to more homebuyers staying on the sidelines," he added.

Rising home ownership costs are deterring some prospective buyers, with mortgage applications falling 1.2% last week from the previous period, the association said. In another sign of the chill from higher mortgage costs, the percentage of existing homes fell every month during the first half of 2022, according to the National Association of Realtors. 

House hunters have been hit with a one-two punch this year of rising mortgage rates and high home prices. Some relief may be on the horizon, as home prices are starting to fall and are likely to continue declining in some real estate markets for the rest of the year, economists predict. 

During the coronavirus pandemic, mortgage rates dipped to historic lows, partly because the Federal Reserve kept its benchmark rate near zero while the U.S. pumped trillions into the economy through its stimulus programs. Those rates — which fell as low as 2.65% in January 2021 — prompted millions of Americans to jump into the real estate market. 

But as demand for homes surged, sellers asked for more money, leading to double-digit annual price increases across the nation. Another reason prices shot up: a shortage of new home construction during the pandemic. 

Cities that had some of the biggest home price increases in the U.S. were Charlotte, North Carolina; Phoenix and San Diego. Some of those same cities, along with Boise, Idaho, and Austin, Texas, will soon see home prices dropping fast, Moody's Analytics Chief Economist Mark Zandi told CBS News earlier this month. 

By contrast, mortgage rates are likely to remain elevated, tweeted Realtor.com Chief Economist George Ratiu. 

Every percentage point increase in mortgage rates adds hundreds of dollars to monthly payments. The jump in rates to 6% means a typical homebuyer will pay up to $600 more per month for a 30-year mortgage, Zandi said.