Minnesota realtors are responding to an increase in mortgage rates.
"I anticipate, you know, over the next couple of weeks there to be some consumer shock in the marketplace," says Nicole Hayden who is with the St. Paul Area Association of Realtors.
Once the shock has worn off?
"I have folks that have been on the sidelines waiting for interest rates to come down and are finally saying to themselves, 'these don't seem to be going in the direction I'm hoping,' so I do still want to make that move before winter," Hayden explains.
She says they are actually hosting a Housing Resource Fair to help prospective buyers, renters and anyone interested to learn about housing options, later this week.
Rates are now nearing 7%, which creates a tough situation for buyers who were perhaps used to 3-4% rates from a few years ago, or the 5% rates seen just last year.
Hayden says they've been near this level all summer, however, and there would be additional consequences if the rates instead fell to 5% again. And it's causing her clients to be more careful and thoughtful about the kinds of homes they purchase.
"And what that does is drive up competition," she adds. "And home purchase price, which you can't change the price you're purchasing the home for. You can refinance an interest rate. So I think it's just important for buyers to understand that flip side of the interest rate impact too."
Federal Reserve hikes key rate for 1st time in 3 years
The Federal Reserve raised its benchmark interest rate Wednesday for the first time since 2023 in an effort to quell stubbornly high inflation, and the central bank signaled another rate hike could occur later this year.
The quarter-point increase lifts the Fed’s key rate to about 3.9% and, over time, could result in higher borrowing costs for mortgages, auto loans and credit cards. In a set of quarterly projections, the Fed also signaled its rate-setting committee could raise it a second time to 4.1%.
The move comes as Americans are already struggling with high costs for groceries, gas and housing. Affordability has taken on a leading role in the upcoming midterm elections, just seven weeks away.
US mortgage rate reaches nearly 7%
Home shoppers holding out for relief from rising mortgage rates may be in for a long wait.
The weekly average rate on a 30-year fixed-rate home loan has been rising for months and this week climbed to just below 7% — its highest level in over 19 months.
The benchmark 30-year fixed rate mortgage rose to 6.95% from 6.76% last week, mortgage buyer Freddie Mac said Thursday. One year ago, the average rate was 6.26%.
This is the fourth week in a row that mortgage rates have moved higher. The average rate hasn’t reached this level since Jan. 30, 2025.
Borrowing costs on 15-year fixed-rate mortgages, often sought by borrowers refinancing a home loan, also rose this week. That average rate increased to 6.26% from 6.09% last week. A year ago, it was at 5.41%.
