U.S. mortgage rates rose to 5% for the first time in more than a decade, raising the pressure on the housing market and adding another burden to homebuyers who were already struggling with rising prices.

Since the beginning of the year, interest rates on a 30-year fixed-rate mortgage have climbed from about 3% to 5%, the fastest jump since the 1980s, according to Freddie Mac. The rise has added hundreds of dollars a month to the typical house payment and comes on top of two years of blistering price increases in excess of 30%.

Such a sudden jump in borrowing costs, in a market where buyers across the nation are already struggling to afford a home, would normally spell doom for home sales and housing prices. But in the unusual pandemic-recovery economy of rising wages, supply chain disruptions and enormous changes in how Americans live and work, it’s unclear how significant a difference higher rates will make.

Economists generally believe rising rates will cool the market a little, at least compared with the past two years of double-digit price gains. Indeed, there are some early indications that expensive markets on the East and West coasts are already seeing a slight decline in buyer interest.

The problem, in the housing market and the broader economy, is that there isn’t much to buy. The inventory of homes for sale remains extremely tight, with far more buyers than sellers. This means that even though rising rates will push many would-be homeowners out of the market or into a lower price range, there remains more demand than homes on the market.


Still, there is only so much the average family’s budget can take. The typical homebuyer’s payment has gone up 35% in just a few weeks, according to Redfin, a national real estate brokerage. That burden comes on top of high prices for food, gas, cars, furniture and so much else.

On Thursday, Redfin said its index of homebuyer demand had declined 3% over the past month. Meantime, agents say there has been a noticeable decline in the intensity of bidding wars — something that is likely to continue as rates increase further.

“I do think we are going to see a correction,” said Heidi Ludwig, a real estate agent with Redfin in Los Angeles. “Buyers are burned out.”