Commentary  The party’s over for many would-be homeowners. The “party” I’m referring to is the historically low interest rates that made borrowing money the most affordable it had ever been. As of August 2022, the average interest rate on a 30-year fixed Freddie Mac mortgage is 4.99 percent, which is up from about 2.68 percent in December 2021.
Before we discuss the math of this and how it affects consumers, let’s take a look at how these numbers are derived. A borrower’s mortgage rate is determined by external economic factors as well as the borrower’s credit history and other factors, such as their debt-to-income ratio. The main external driver of mortgage rates is the Federal Reserve. One of the Fed’s main purposes is to maintain a stable inflation rate. The way that the Fed is able to regulate the inflation rate is through the federal funds rate, which is the rate at which banks borrow money from each other overnight….